Crude Oil Rises on Forecast of Supply Decline, Weaker Dollar

Oil rose in New York before a report forecast to show U.S. crude supplies dropped last week.

Oil recovered some of yesterday’s 1.8 percent loss as the dollar fell to a five-month low, spurring demand for commodities. The Energy Department may say today U.S. crude supplies shrank 1.75 million barrels from 357.4 million last week, according to a Bloomberg News survey.

“The consensus expects some crude inventory declines, and if that turns out to be correct that should help prices,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich AG in Vienna. “Apart from that, there’s a bit of support from the weakness in the dollar.”

The November contract on the New York Mercantile Exchange rose as much as 71 cents, or 1 percent, to $75.68 a barrel, and traded for $75.48 at 1:34 p.m. London time. Yesterday it lost $1.22. Brent crude for November fell 6 cents to $78.36 a barrel on the London-based ICE Futures Europe exchange.

November Brent’s premium to the New York contract was at $2.88 a barrel today after reaching $3.45 yesterday.

Nymex crude for October delivery slipped $1.34, or 1.8 percent, to $73.52 a barrel yesterday, the lowest closing price since Aug. 31. The contract expired at the end of floor trading.

API Report

Futures fell yesterday after the industry-funded American Petroleum Institute said crude inventories grew by 2.23 million barrels to 364.1 million, the highest level for this time of year in five years. Refineries probably ran at 86.8 percent of capacity last week, according to Bloomberg’s survey of analysts.

Supplies of crude at the Cushing, Oklahoma, delivery point for New York futures fell by 219,000 barrels to 34.8 million, the API data showed. Inventories in the U.S. Midwest and the Gulf Coast, home to a majority of the country’s refining capacity fell.

“Huge discrepancies often exist between the API and Department of Energy report, and we have the feeling this is going to be one of those weeks.” Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said in a report today.

Oil-supply totals from the API and DOE have moved in the same direction 75 percent of the time in the past four years, according to data compiled by Bloomberg.

The premium between the November New York oil future and December contract narrowed to $1.47 a barrel today. It was as wide as $1.75 on Sept. 17. The dollar traded at $1.3366 per euro as of 1:34 p.m. London time after sinking as low as $1.3396, the weakest level since April 27.

“Fundamentals are not strong enough to go above 80 without support from general decrease in risk aversion, and therefore rising stock markets,” said Raiffeisen’s Loacker.

U.S. gasoline demand rebounded from a 23-month low last week, MasterCard Inc. reported yesterday. Motorists bought an average 9.01 million barrels a day of the motor fuel, up 1.9 percent from the prior week, according to the weekly SpendingPulse report. It was the first increase in five weeks.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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