BW:Oil Rises From Three-Month Low as U.S. Gasoline Supplies Drop
May 18 (Bloomberg) -- Oil rose from a three-month low in New York as signs of shrinking U.S. gasoline supplies prompted bets that this month’s price drop has been excessive.
Gasoline stockpiles fell by 676,000 barrels last week, the American Petroleum Institute said yesterday, triggering speculation that inventory data from the Energy Department today may show a smaller increase than analysts forecast. Crude inventories at the delivery point in Cushing, Oklahoma slid 1.5 million barrels, the most since June, the API said.
“Commodities are still in a very long-term upward move,” said Eugen Weinberg, head of commodities research at Commerzbank AG, said in a television interview with Bloomberg News. Prices may “correct” lower in the short-term, he said.
Crude for June delivery on the New York Mercantile Exchange rose as much as $1.89, or 2 percent, to $98.80 a barrel and was at $98.62 at 10:01 a.m. London time. Oil yesterday lost 46 cents, or 0.5 percent, to $96.91, the lowest settlement since Feb. 22. The contract has lost 13 percent this month.
Brent oil for July settlement climbed as much as $1.68, or 1.5 percent, to $111.67 a barrel on the London-based ICE Futures Europe exchange. The contract yesterday declined 85 cents, or 0.8 percent, to $109.99.
Brent Premium
The European benchmark was at a premium of $12.31 a barrel to U.S. futures. The difference between front-month contracts in London and New York surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing. The spread averaged 76 cents last year.
Gasoline stockpiles in the U.S. fell to 208.8 million barrels, according to the API report. The decline in crude inventories at Cushing was the biggest since the week ended June 25. Supplies of distillate fuel, a category that includes heating oil and diesel, fell 2.8 million barrels. Total U.S. crude stockpiles increased 2.67 million barrels to 369.9 million, the API report showed.
Analysts’ estimates in a Bloomberg survey indicated the Energy Department may say crude supplies climbed 1.7 million barrels while gasoline stockpiles increased by 950,000 barrels.
The API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey. Oil-supply totals from the API and the department have moved in the same direction 75 percent of the time over the past four years.
Libya Defection
“The API data set quite a bullish platform,” said Serene Lim, an energy and commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “It’s going to be a light day on the data front. We’ll just be watching out for the Energy Department inventory.”
Unrest in the Middle East, coupled with the impact from Japan’s worst nuclear crisis, will have a “significant” effect on long-term energy prices, Ray Eyles, chief executive officer of JPMorgan Chase & Co.’s commodities business in Asia, said in an interview in Singapore.
Libya’s top oil official, Shokri Ghanem, defected from the regime of Muammar Qaddafi, a spokesman for the rebel group at war with the country’s leader said yesterday.
Brent has climbed 18 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, Oman and Yemen. Syrian protesters kept up demonstrations following reports of the discovery of a mass grave containing the bodies of anti-government activists.
Crude in New York fell yesterday after reports showed U.S. housing starts dropped and industrial output stalled in April, stoking speculation fuel demand will falter.
Mississippi River
Mississippi River water pouring through 15 gates on Louisiana’s Morganza floodway has greatly reduced the risk of flooding to oil refineries that account for about 14 percent of U.S. capacity.
The diversion means the Mississippi has crested at about 17 feet in New Orleans, 2.5 feet below the forecast, and is expected to top out at 45 feet in Baton Rouge, below a record 47.5 that was expected by May 22, according to the U.S. Lower Mississippi River Forecast Center’s website.
Oil options volatility rose. Implied volatility for at-the- money options expiring in July, a measure of expected price swings in futures and a gauge of options prices, was 36.6 percent as of 2 p.m. in New York, up from 35.8 percent yesterday.
Options on oil for June delivery expired yesterday. The most-active contract for July was the $70 put, which gives investors the right to sell crude oil for delivery that month at $70 a barrel.
--With assistance from Ann Koh in Singapore. Editors: John Buckley, Raj Rajendran
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
