Oil Rises as Dollar Declines, Crude Supplies Fall Unexpectedly

By Ben Sharples

Oct. 8 (Bloomberg) -- Oil rose in New York as the dollar weakened against the euro and a government report showed an unexpected drop in U.S. crude supplies, boosting optimism about a demand recovery in the biggest energy-consuming nation.

Oil pared yesterday’s 1.9 percent fall as the dollar declined, increasing the appeal of commodities as an alternative investment. Prices were also supported by a report from the Energy Information Administration, which showed crude stockpiles fell 978,000 barrels last week. A 2 million-barrel gain was forecast in a Bloomberg analyst survey.

“General weakness in the U.S. dollar is supporting oil,” Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said by telephone. Oil “came off last night but is finding support today.”

Crude oil for November delivery gained 63 cents, or 0.9 percent, to $70.20 a barrel in electronic trading on the New York Mercantile Exchange at 12:22 p.m. Sydney time. Yesterday, the contract dropped $1.31 to settle at $69.57. Prices have gained 57 percent since the start of the year.

The drop in crude supplies “is probably something the market has moved on,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. “Alcoa reported much better-than-expected earnings after U.S. markets closed, and that is something that could be playing into stock market futures and the oil price.”

U.S. stocks rose for a third day yesterday as banks climbed on an analyst upgrade of Bank of America Corp. and Wells Fargo & Co.’s plan to boost credit-card rates. The Standard & Poor’s 500 Index gained 0.3 percent in New York. The Dow Jones Industrial Average slipped 0.1 percent. Australia’s benchmark S&P/ASX 200 Index increased 1.5 percent at 12:14 p.m. in Sydney.

Gold Surges

Alcoa Inc., the first Dow Jones Industrial Average company to report for the three months through Sept. 30, posted an unexpected third-quarter profit.

Gold surged to a record for a third day driven by mounting concern that currencies including the dollar will lose value, fueling demand for the metal. Gold for immediate delivery, which traded at $1,050.85 at 9:22 a.m. in Singapore, has risen 16 per cent over the past year.

The dollar traded at $1.4735 against the euro at 12:15 p.m. in Sydney, from $1.4691 yesterday. The U.S. currency depreciated earlier this week on concern the Federal Reserve will be slower to raise interest rates than policy makers in other nations.

Brent crude oil for November settlement gained 68 cents, or 1 percent, to $67.88 a barrel on the London-based ICE Futures Europe exchange, at 12:24 p.m. Sydney time. Yesterday, the contract fell $1.36, or 2 percent, to close at $67.20.

Typhoon Alert

Typhoon Melor smashed into Japan near the city of Nagoya, today bringing winds of 139 kilometers (86 miles) an hour and causing disruptions to fuel distribution. Nippon Oil Corp. halted shipments from a refinery in Yokohama, near Tokyo, and a plant in Sendai in northern Japan, a company spokesman said.

Idemitsu Kosan Co. suspended shipments of refined oil products from a refinery near Tokyo, a company spokeswoman said.

U.S. inventories of crude oil dropped 978,000 barrels to 337.4 million, the Energy Department report showed. Imports fell 4.6 percent to 9.1 million barrels a day last week.

Distillate fuel inventories climbed 679,000 barrels to 171.8 million last week, the report showed. Supplies were estimated to have declined 400,000 barrels, according to the analyst survey. Gasoline stockpiles climbed 2.94 million barrels to 214.4 million.

Refineries operated at 85 percent of capacity, up 0.4 percentage point from the previous week. Analysts forecast that utilization rates would drop 0.3 percentage point. U.S. refiners often schedule repairs and upgrades in September and October as gasoline consumption declines and before heating-oil use rises.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net