BLBG: Copper Rises to Record as Inflation Speeds Up in China, Biggest Consumer
Oil traded near a one-week high in New York as speculation flooding on the Mississippi will disrupt fuel supplies countered concern demand may falter in China, the world’s second-largest crude consumer.
Futures were little changed after climbing as much as 0.7 percent today as the flood moved south from Memphis, threatening refineries and shipping traffic, and after a report showed U.S. gasoline inventories fell last week. Chinese inflation exceeded the government’s target, stoking speculation the central bank will raise interest rates to cool the economy.
“The market has been rallying the past two days and now may be in a consolidation phase so with the China data coming out that sparked a sell-off,” said Serene Lim, an energy and commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The markets remain very jittery and traders will err on the side of caution.”
Crude for June delivery traded at $104 a barrel, up 12 cents, in electronic trading on the New York Mercantile Exchange at 2:06 p.m. Sydney time. The contract climbed as high as $104.60 and dropped as low as $103.36. Yesterday, it rose $1.33 to $103.88, the highest since May 4. Prices are 36 percent higher the past year.
Brent crude for June settlement rose 7 cents, or 0.1 percent, to $117.70 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it gained $1.73, or 1.5 percent, to $117.63, the highest settlement since May 4.
China Inflation
China’s consumer prices rose 5.3 percent in April from a year earlier, according to the statistics bureau in Beijing. The gain was above the government’s 4 percent full-year target for a fourth straight month and higher than the 5.2 percent median forecast in a Bloomberg News survey of economists.
Economists surveyed by Bloomberg forecast one more interest-rate increase this year, adding to four since mid- October. Officials have raised banks’ reserve requirements, and reined in credit growth from the record levels of 2009 and 2010.
U.S. gasoline futures climbed 3.1 percent yesterday as flooding on the Mississippi River threatened refineries and shipping. A total of 11 plants, accounting for 13 percent of U.S. fuel output, are located between New Orleans and Baton Rouge, according to Lipow Oil Associates LLC in Houston.
The river is holding just below 48 feet (14.6 meters) in Memphis, Tennessee. Three million acres, an area almost the size of Connecticut, may go under water as the flooding moves south, Louisiana Governor Bobby Jindal said at a press conference in Baton Rouge, the state capital.
Morganza Spillway
Valero Energy Corp., the largest U.S. refiner, reduced operations at its Memphis plant to between 80 percent and 85 percent of capacity because of flooding, according to people familiar with operation. The plant has a capacity of 195,000 barrels a day.
To relieve the threat to New Orleans and Baton Rouge, the corps may open the Morganza Spillway. Opening the spillway halfway would inundate a swath of central Louisiana along the Atchafalaya River with 5 feet to 20 feet of water.
Louisiana declined to identify the refineries that may be affected. One of the plants is on the Mississippi River, the statement said, citing the state’s Department of Natural Resources fuel team. Alon USA Energy Inc.’s Krotz Springs refinery in Louisiana will be affected if the spillway is opened, Lisa Vidrine, director of the St. Landry Parish office of emergency preparedness, said in a telephone interview.
Flooding after the opening of the spillway may result in “reducing operating capacity to 75 percent for two weeks and then further significant reductions,” according to the DNR.
Gasoline Stockpiles
The 104,532 metric-ton tanker Zaliv Baikal was prevented from delivering crude to Exxon Mobil Corp.’s Baton Rouge refinery because of concern that the ship wouldn’t fit under the Interstate 10 bridge spanning the Mississippi River.
U.S. stockpiles of gasoline shrank 1.8 million barrels last week from the previous week, according to the API report. An Energy Department report today will probably show supplies fell 750,000 barrels, according to the median estimate of 17 analysts in a survey by Bloomberg News. Supply disruptions after May 6 won’t be reflected in the department’s report.
The peak gasoline demand period starts after the Memorial Day holiday in late May and ends on Labor Day in early September. The holidays fall on May 30 and Sept. 5 this year.
U.S. crude stockpiles climbed 2.95 million barrels last week to 367.2 million, according to the API report. An Energy Department report today may show supplies rose 1.5 million barrels, a Bloomberg News survey shows.
July $115 Call
The most-active oil option was the July $115 call, which gives investors the right to buy crude for July delivery at $115 a barrel. The contract rose 15 percent to $1.44 after more than doubling on May 9. Oil presents a “short-term buying opportunity” because of constraints to supply and growing demand, according to Bank of America Merrill Lynch.
New York futures have climbed 14 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya, Algeria, Bahrain, Iran, Syria and Yemen.
North Atlantic Treaty Organization jets intensified strikes on the Libyan capital of Tripoli, including what the alliance identified as “command-and-control” bunkers from which Muammar Qaddafi is carrying out a campaign against rebels.
Brent, the European benchmark, traded at a premium of $13.52 a barrel to U.S. futures today. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21. It averaged 76 cents last year.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net;
To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net
