Oil Rises a Second Day on Forecast U.S. Supply Shrank Last Week

By Grant Smith

Dec. 16 (Bloomberg) -- Crude oil rose for a second day before a report forecast to show that U.S. crude inventories declined last week.

Oil advanced in tandem with European equities before a U.S. Federal Reserve meeting today expected to hold interest rates near a record low to support economic growth. The Energy Department will likely report later today that stockpiles dropped 2 million barrels in the week ended Dec. 11, according to a Bloomberg survey.

“Oil is holding support lines before the inventory data,” said Robert Montefusco, broker at Sucden Financial in London. “There’s talk about demand coming back in the second half of next year, currencies have been supportive and the colder weather can only help the market for heating oil.”

Crude oil for January delivery gained as much as 90 cents, or 1.3 percent, to $71.59 a barrel in electronic trading on the New York Mercantile Exchange. It was at $71.27 at 10:35 a.m. London time.

Yesterday, the contract rose $1.18, or 1.7 percent, to settle at $70.69 a barrel, snapping its longest decline since 2001. Futures have climbed 60 percent this year.

An Energy Department report today will show U.S. crude oil inventories declined last week as imports fell for a third week, a Bloomberg News survey of analysts showed.

Stockpiles declined by 2 million barrels in the week ended Dec. 11, from 336.1 million the prior week, according to the median of 17 estimates. The department will release its Weekly Petroleum Status Report at 10:30 a.m. in Washington.

API Report

The American Petroleum Institute reported yesterday crude oil inventories rose 924,000 barrels last week to 332.5 million. Gasoline stocks climbed 2.07 million barrels to 217 million, the highest since April, according to the API.

The industry-funded API collects stockpile information on a voluntary basis while the government requires that reports be filed with the Energy Department.

The Organization of Petroleum Exporting Countries, which produces about 40 percent of the world’s oil, raised its estimate for the amount of crude group members will have to pump next year as consumption recovers.

OPEC will need to produce 28.61 million barrels a day to satisfy demand in 2010, it said in an e-mail report yesterday. That’s about 100,000 barrels a day more than last month’s projection and represents an increase of 30,000 barrels a day from 2009, the first annual gain in three years.

Angola Meeting

OPEC is scheduled to meet Dec. 22 in Luanda, Angola. At previous gatherings this year, members have called for better implementation of the 4.2 million barrels a day of cuts announced in 2008.

Brent crude oil for January settlement was at $72.79 a barrel on the London-based ICE Futures Europe exchange, up 74 cents, at 10:33 a.m. London time. Yesterday, the contract rose 16 cents to settle at $72.05 a barrel.

The January contract for Brent expires today. The more widely traded February contract was at $73.61 a barrel, up 74 cents.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net