BLBG: Crude Oil Extends Gains as U.S. Supplies Fall More Than Analysts Forecast
Crude oil climbed for a second day after a report showed that U.S. supplies dropped as refineries bolstered fuel output and on speculation that European leaders will agree on steps to address the region’s debt crisis.
Oil rose as much as 1.6 percent after the Energy Department said stockpiles fell 3.73 million barrels to 351.7 million last week. Analysts surveyed by Bloomberg News forecast a decrease of 2 million. Refineries operated at 90.3 percent of capacity, an 11-month high. European officials meet tomorrow to break a deadlock over a new Greek rescue.
“The crude number was very strong,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Refineries are operating at the highest rate this season, which suggests there is pretty strong demand somewhere. It looks like U.S. refineries are producing a great deal of fuel for export.”
Crude oil for August delivery increased $1.12, or 1.2 percent, to $98.62 a barrel at 11:11 a.m. on the New York Mercantile Exchange. The August contract expires today. The more-actively traded September future advanced $1.03, or 1.1 percent, to $98.89.
August oil traded at $98.15 before the release of the report at 10:30 a.m. in Washington.
Brent oil for September settlement rose $1.21, or 1 percent, to $118.27 a barrel on the London-based ICE Futures Europe exchange.
Supplies at Cushing, Oklahoma, the physical delivery point for New York oil futures contracts and the largest crude-trading and storage hub in the country, tumbled 977,000 barrels to 36.7 million.
Berlin Meeting
German Chancellor Angela Merkel and French President Nicolas Sarkozy are meeting in Berlin today to seek common ground on fighting the region’s debt crisis before tomorrow’s European summit, a meeting that their Greek counterpart says could make or break the euro.
“There’s optimism that an agreement will come out of tomorrow’s EU summit, will be enough to calm fears about the debt crisis,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
European officials are considering steps previously rejected by Germany, including the use of precautionary credit lines, to prevent the spread of the region’s debt crisis, a person close to the talks said. Other options up for discussion include enabling the main 440 billion-euro ($626 billion) rescue fund to lend to recapitalize banks, said the person, who declined to be named because negotiations are in progress.
Together with a second Greek aid package, the goal is to prove to markets that Europe has the will and the tools to prevent the 21-month sovereign debt crisis from engulfing Spain and Italy.
President Barack Obama endorsed a U.S. deficit-cutting proposal by a bipartisan group of senators. The plan for a $3.7 trillion debt reduction faces resistance from House Republicans as lawmakers intensify efforts for a compromise on government spending less than two weeks before a threatened default.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
