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Oil tops three-week high on supply drop

Published: 24/12/2009 05:00

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Oil prices jumped more than 3 percent to above 76 U.S. dollars a barrel on Wednesday as a larger-than-expected slide in fuel stockpiles and a weakening dollar boosted energy market.

Crude futures in New York opened above 74 dollars on Wednesday boiled by a report from American Petroleum Institute (API). Late Tuesday, the industry group reported commercial crude oil inventories fell by 5.8 million barrels in the week ending on Dec.4.

Crude oil stocks at Cushing, Oklahoma, delivery point for the New York market light sweet crude benchmark West Texas Intermediate, rose by 1.5 million barrels last week, according to API data.

The API reported refinery utilization rose 1.3 percentage points to 81.4 percent of capacity. Gasoline stockpiles fell by 753,000 barrels, while distillate supplies rose 1 million barrels.

Oil prices continued to rally on Wednesday after the closely watched government weekly inventory report showed a larger-than-expected drop in fuel supply.

U.S. Energy Department Energy Information Administration (EIA) said crude oil inventories plunged by 4.84 million barrels to 327.55 million barrels for the week ending on Dec. 18, while the market was expecting a decline ranging between 1 to 2 million barrels. It was the third straight week that crude stocks fell.

Gasoline inventories fell by 883,000 barrels to 216.33 million barrels, while distillate stocks, which include heating oil and diesel fuel, dropped by 3.03 million barrels to 161.34 million barrels. Both decreases exceeded analysts’ anticipation.

Refining capacity utilization was unchanged at 80.0 percent, below expectations of a rise to 80.2 percent, EIA report showed.

The EIA report also signaled a pickup in the fuel consumption. Gasoline demand averaged 9.05 million barrels a day in the week ended Dec. 18, 0.9 percent higher than previous week and 2 percent higher than same period last year. Meanwhile, consumption of distillate fuel averaged 3.99 million barrels last week, which is the highest level since April.

The market also embraced a bunch of economic readings on Wednesday. New home sales surprisingly sank 11.3 percent in November, down to the lowest level since April. The median sales price of 217,400 dollars was nearly 2 percent lower from a year earlier.

The data demonstrated the road to recovery is still rocky. On Tuesday the U.S. government lowered its estimate for third-quarter economic growth to an annual rate of 2.2 percent, down from a previous estimate of 2.8 percent.

However, it was the first positive gain in GDP growth. And on Wednesday the U.S. Commerce Department said that in November personal incomes rose 0.4 percent and personal spending rose 0.5 percent.

More upbeat news was that the Reuters/University of Michigan final index of consumer sentiment rose to 72.5 from 67.4 in November. It is the first increase in three months.

The dollar dropped against major currencies on Wednesday, which helped to boost oil prices as a weaker greenback increases the appeal of commodities as an alternative investment.

Light, sweet crude for February delivery gained 2.27 dollars to settle at 76.67 dollars a barrel on the New York Mercantile Exchange (NYMEX).

In other NYMEX trading in January contracts, heating oil rose 6.32 cents to settle at 2.0118 dollars. Gasoline gained 7.78 cents to settle at 1.9666 dollars. Natural gas rose 10.6 cents to settle at 5.821 dollars per 1,000 cubic feet.

In London, Brent crude for February delivery rose 1.99 dollars to 75.45 dollars on the ICE Futures Exchange.

VietNamNet/Xinhuanet

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