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Oil settles near US$86 on surprise drop in supplies
Source: Agencies |
April 15, 2010, Thursday
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OIL prices jumped more than 2 percent yesterday after the government unexpectedly reported the first weekly decline in crude supplies in more than two months.
The United States' oil supply is expected to resume growing as it usually does ahead of the summer vacation months. But for one week at least, an increase in Americans' gasoline usage helped put a dent in the ample crude inventory.
The U.S. also imported less oil last week, which helped cut supply levels.
The Energy Information Administration said crude supplies dropped by 2.2 million barrels for the week ended April 9. Analysts expected them to increase by 1.6 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. It's the first weekly decline since January.
Gasoline supplies also sank as motorists burned more fuel.
Benchmark crude for May delivery climbed after the report, adding US$1.79 to settle at US$85.84 a barrel on the New York Mercantile Exchange. In London, Brent crude gained US$1.43 to settle at US$86.15 on the ICE futures exchange.
Oil supplies typically grow at this time of year as refineries slow fuel production and prepare their equipment to make summer grades of gasoline that contribute less to air pollution. The drop in last week's inventories was unexpected, and it's unlikely to continue falling, analyst Stephen Schork said. Before yesterday's report, crude supplies had grown for nine straight weeks.
"I'd expect to see supplies grow for at least the next three weeks," Schork said.
Those nuances may be lost, however, on speculative investors who have rushed into commodities trading recently, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. Oil prices have been jumping on relatively minor developments like yesterday's EIA report, he said.
Managers of exchange-traded funds, pension funds and other speculative investors don't really care about how much oil sits in U.S. inventories, he said. What matters on Wall Street is the general expectation that oil prices will soon rise.
"They all think there's easy money to be made by simply buying oil futures," Ritterbusch said. "But this whole thing could be a bubble. Prices could go down."
Commodity investors have been especially busy on the Nymex this month. They've set records for trade volume twice this month with 1,423,536 contracts changing hands on Tuesday and 1,121,913 contracts traded on Friday.
Elsewhere, the Organization of Petroleum Exporting Countries said oil demand will rise this year, but its April forecast was more conservative than earlier reports. OPEC said the world should consume 85.21 million barrels of oil per day this year, down from its previous estimate of 85.24 million barrels.
In other Nymex trading in May contracts, heating oil rose 2.79 cents to settle at US$2.2421 a gallon and gasoline added 2.34 cents to settle at US$2.3327 a gallon. Natural gas increased by 3.9 cents to settle at US$4.199 per 1,000 cubic feet.
The United States' oil supply is expected to resume growing as it usually does ahead of the summer vacation months. But for one week at least, an increase in Americans' gasoline usage helped put a dent in the ample crude inventory.
The U.S. also imported less oil last week, which helped cut supply levels.
The Energy Information Administration said crude supplies dropped by 2.2 million barrels for the week ended April 9. Analysts expected them to increase by 1.6 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. It's the first weekly decline since January.
Gasoline supplies also sank as motorists burned more fuel.
Benchmark crude for May delivery climbed after the report, adding US$1.79 to settle at US$85.84 a barrel on the New York Mercantile Exchange. In London, Brent crude gained US$1.43 to settle at US$86.15 on the ICE futures exchange.
Oil supplies typically grow at this time of year as refineries slow fuel production and prepare their equipment to make summer grades of gasoline that contribute less to air pollution. The drop in last week's inventories was unexpected, and it's unlikely to continue falling, analyst Stephen Schork said. Before yesterday's report, crude supplies had grown for nine straight weeks.
"I'd expect to see supplies grow for at least the next three weeks," Schork said.
Those nuances may be lost, however, on speculative investors who have rushed into commodities trading recently, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. Oil prices have been jumping on relatively minor developments like yesterday's EIA report, he said.
Managers of exchange-traded funds, pension funds and other speculative investors don't really care about how much oil sits in U.S. inventories, he said. What matters on Wall Street is the general expectation that oil prices will soon rise.
"They all think there's easy money to be made by simply buying oil futures," Ritterbusch said. "But this whole thing could be a bubble. Prices could go down."
Commodity investors have been especially busy on the Nymex this month. They've set records for trade volume twice this month with 1,423,536 contracts changing hands on Tuesday and 1,121,913 contracts traded on Friday.
Elsewhere, the Organization of Petroleum Exporting Countries said oil demand will rise this year, but its April forecast was more conservative than earlier reports. OPEC said the world should consume 85.21 million barrels of oil per day this year, down from its previous estimate of 85.24 million barrels.
In other Nymex trading in May contracts, heating oil rose 2.79 cents to settle at US$2.2421 a gallon and gasoline added 2.34 cents to settle at US$2.3327 a gallon. Natural gas increased by 3.9 cents to settle at US$4.199 per 1,000 cubic feet.
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