BLBG: Oil Trades Near $36 After Bigger-Than-Expected Jump in Supplies
Crude oil traded near $36 a barrel after dropping to the lowest in four weeks yesterday as a U.S. government report showed a bigger-than-expected increase in inventories.
U.S. supplies rose 4.72 million barrels to 350.8 million barrels last week, the Energy Department said. Stockpiles were forecast to climb 2.75 million barrels, according to a Bloomberg News survey. U.S. refiners operated at 81.6 percent of capacity last week, the lowest since the period ended Oct. 3 when the Gulf Coast was recovering from two hurricanes, the report showed.
“You’ve got a lot of plants shut down for maintenance and the crude continues to pile up,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “The build has a lot to do with the low refinery usage right now.”
Crude oil for March delivery was at $36.08 a barrel, up 14 cents, at 1:21 p.m. Singapore time on the New York Mercantile Exchange. Yesterday, oil fell $1.61, or 4.3 percent, to $35.94 a barrel in New York , the lowest settlement since Jan. 15.
Oil has declined 19 percent this year and dropped 61 percent from a year earlier.
“This paints a picture of still very weak demand unable to absorb the crude stocks in the U.S.,” said Yingxi Yu, a manager for commodities research at Barclays Capital in Singapore. “Overall, the market is still very distorted and it’s made worse by the higher inventories in Cushing. So it’s unlikely the market will reach any equilibrium soon.”
U.S. crude oil inventories have gained in 18 of the past 20 weeks, leaving stockpiles 16 percent higher than the five-year average for the period, the department said yesterday.
Contango Deepens
The price of oil for delivery in April is more than $6 a barrel higher than for March, up from $4.59 last week. December futures are more than $17 above the front month, compared with $13.90 last week.
Prices for delivery in future months are higher than for earlier ones, a situation known as contango, allowing buyers to profit from hoarding oil.
Supplies at Cushing, Oklahoma, where West Texas Intermediate oil traded on Nymex is stored, climbed 1.7 percent to 34.9 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.
“WTI seems to be in a world of its own right now with these stock builds and that needs to stop or else you’ll continue to see this sharp contango,” said Hudson Capital’s Kornafel.
U.S. refinery utilization dropped 1.9 percentage points from the prior week, the Energy Department said. Analysts forecast that there would be no change.
Refinery Maintenance
Companies often shut refinery units for maintenance in January and February as attention shifts away from heating oil and before gasoline use rises.
Gasoline inventories fell 2.66 million barrels to 217.6 million, the biggest drop since September. A 500,000 barrel increase was forecast, according to the median of 15 analyst responses in the Bloomberg News survey.
Gasoline futures for March delivery are up .92 cents to $1.2790 a gallon in New York. It climbed 2.59 cents, or 2.1 percent, to $1.2698 a gallon yesterday.
Gasoline’s premium over the crude oil future’s prices, known as the crack spread, has surged to $17.58 a barrel, the highest level since July 2007. The four-week average of demand for the motor fuel has climbed by 68,000 barrels a day from the week ended Jan. 30.
Gasoline Demand
“In terms of the relative value of products, we are more positive on gasoline,” said Barclay’s Yu. “Following the dip back in September, there has been a consistent improvement in gasoline demand in the U.S. There are early signs the worst is over for now.”
The four-week average of motor fuel consumption fell by 5.9 percent during September, Energy Department data showed.
The average U.S. pump price for regular gasoline rose 1.2 cents to $1.94 a gallon, AAA, the nation’s largest motorist organization, said on its Web site yesterday. Prices have declined 53 percent from the record $4.114 a gallon reached on July 17.
Brent crude oil for March settlement was at $44.90 a barrel, up 62 cents, on London’s ICE Futures Europe exchange at 1:15 p.m. Singapore time. The contract expires today. The more-active April future was at $46.05 a barrel, up 73 cents, at 1:22 p.m. Singapore time.
Brent futures are at a premium of more than $8 over West Texas Intermediate, the grade that’s traded in New York.
The International Energy Agency, in its report yesterday, cut its global oil-demand forecast for 2009, projecting consumption will decline by 1 million barrels a day as the global economic slowdown deepens, the biggest drop since 1982.
The IEA, which advises 28 developed nations on energy policy, trimmed its 2009 forecast by 570,000 barrels from last month to 84.7 million a day because of a weaker outlook from the International Monetary Fund.
