Oil Snaps Five-Day Decline After Report Shows Drop in Supplies

By Christian Schmollinger

Dec. 9 (Bloomberg) -- Crude oil climbed above $73 a barrel in New York after an industry report showed U.S. supplies dropped, bolstering optimism that fuel demand in the biggest energy-consuming nation will increase.

Oil rose for the first time in six days after the American Petroleum Institute said crude inventories fell by 5.82 million barrels. Futures dropped to an eight-week low yesterday as the dollar gained against the euro. The U.S. Energy Department will release its weekly report today in Washington. Inventories are forecast to rise, according to a Bloomberg News survey.

“After the API numbers came out, the market shot up right away,” said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. “But people are holding back a bit for the EIA numbers. If we see a similar number there, oil could spike up $2 or $3.”

Crude oil for January delivery gained as much as 72 cents, or 1 percent, to $73.34 a barrel in electronic trading on the New York Mercantile Exchange. It was at $73.01 at 3:12 p.m. in Singapore. Yesterday, the contract fell $1.31 to $72.62 a barrel, the lowest settlement since Oct. 9. Futures are up 64 percent this year.

The Energy Department report is forecast to show that crude inventories increased 250,000 barrels, according to the survey. Oil-supply totals from the API and Energy Department moved in the same direction 75 percent of the time in the past four years, according to data compiled by Bloomberg News.

Dollar Strength

The euro traded near a one-month low against the dollar on speculation credit ratings of more European nations will be cut after Greece’s debt ranking was lowered by Fitch Ratings Ltd. The dollar was little changed after rising a third day yesterday to $1.4704 per euro in New York.

“The dollar has been a very supportive element for oil in recent months,” said Toby Hassall, an analyst at CWA Global Markets Pty in Sydney. “If you pull that support away, it exposes a bit of downside.”

Gasoline supplies fell 753,000 barrels last week, according to the API report. Inventories of distillate fuel, a category that includes heating oil and diesel, rose 1.01 million barrels to 168.9 million, the report showed.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires reports to be filed with the Energy Department for its weekly survey.

The Energy Department report will likely show gasoline inventories rose 1.6 million barrels in the week ended Dec. 4 from 214.1 million the prior week, according to a survey of analysts. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell 750,000 barrels from 165.7 million the prior week.

Brent Premium

Brent crude oil for January settlement rose as much as 53 cents, or 0.7 percent, to $75.72 a barrel on the London-based ICE Futures Europe exchange. It was at $75.52 a barrel at 3:12 p.m. Singapore time. The contract fell $1.24, or 1.6 percent, to $75.19 a barrel yesterday.

Brent traded at a premium of $2.44 a barrel to West Texas Intermediate contracts traded on New York today after widening to $2.57 yesterday, the highest since August. The Nymex contract has declined relative to the U.K. grade as U.S. stockpiles rose.

Oil inventories at Cushing, Oklahoma, the delivery point for Nymex futures, rose to 30.89 million barrels in the week ending Nov. 27, the highest since early September.

“The refinery runs are in the low 80’s or lower now, so we’ll have to see those runs get back up to 85 percent and then you can start taking those stocks out of Cushing,” said Hudson Capital’s Chu. “The runs are really the key.”

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net