Oil Drops From Two-Year High Amid Forecasts U.S. Stockpiles of Crude Rose
Crude oil fell from the highest level in two years as the dollar strengthened against the euro, curbing the appeal of commodities as an alternate investment, and equities declined.
Oil dropped for the first time in seven days as the euro slipped amid concern some governments in Europe may struggle to pay their debt. The Standard & Poor’s 500 Index decreased, led by financial and consumer companies.
“The dollar’s stronger today, so certainly that’s helping to keep a lid on prices,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania.
Crude for December delivery fell 34 cents, or 0.4 percent, to settle at $86.72 a barrel on the New York Mercantile Exchange. Earlier, it touched $87.63, the highest price since Oct. 9, 2008, on an intraday basis. Futures have risen 9.2 percent in the past year.
Prices declined from the settlement as the dollar extended its gains. Oil pared those losses after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles decreased 7.4 million barrels to 360.2 million. It was the biggest one-week drop since the aftermath of Hurricanes Gustav and Ike in September 2008.
December oil fell 51 cents, or 0.6 percent, to $86.55 a barrel in electronic trading at 4:31 p.m.
Brent crude for December dropped 13 cents to settle at $88.33 a barrel on the London-based ICE Futures exchange.
Dollar Gains
The dollar increased 1.1 percent to $1.3771 per euro at 4:39 p.m. in New York. The S&P 500 fell 9.85 points to 1,213.40, and the Dow Jones Industrial Average retreated 60.09 points, or 0.5 percent, to 11,346.75.
Oil has risen 6.5 percent this month as the dollar weakened after the Federal Reserve announced Nov. 2 it would purchase $600 billion in additional assets to stimulate the economy, a move known as quantitative easing.
“Financial factors like the euro-dollar and equities are driving the recovery, but sustained gains on the back of fundamentals are unlikely,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Inventories are plentiful, there are no serious supply disruptions and the dollar rebound is capping gains.”
Heating oil and gasoline futures advanced before tomorrow’s U.S. inventory report. Fuel stockpiles probably fell last week, according to a Bloomberg survey of analysts.
Inventories
The Energy Department report may show that supplies of distillate fuel, which include heating oil and diesel, fell 2 million barrels from 164.9 million, according to a Bloomberg News survey of 15 analysts. Inventories were 19 percent above the five-year average in the week ended Oct. 29.
Heating oil for December delivery rose 0.90 cent, or 0.4 percent, to settle at $2.4067 a gallon on the Nymex. Prices increased for a seventh consecutive session, the longest advance since April.
Gasoline inventories probably decreased 1 million barrels in the week ended Nov. 5 from 212.3 million, according to the Bloomberg News survey.
Gasoline for December delivery rose 0.65 cent, or 0.3 percent, to $2.185 a gallon on the Nymex, the highest settlement price since Aug. 3.
Crude stockpiles in the U.S. increased 1.5 million barrels last week from 368.2 million, according to the analyst forecast. That would take inventories to the largest amount since May 2009. Supplies were 14 percent above the five-year in the last report.
The Energy Department will release its Weekly Petroleum Status Report at 10:30 a.m. tomorrow in Washington.
EIA, IEA Forecasts
The U.S. Energy Department increased its crude oil price forecast for 2011 to an average $85.17 a barrel from $83, according to its monthly Short-Term Energy Outlook, released today. It also boosted its fourth-quarter 2011 forecast by $2 from a month ago to $87 a barrel “as U.S. and global economic conditions improve.”
The department raised its outlook for global oil consumption next year to 87.77 million barrels a day from 87.44 million last month.
Earlier today, the International Energy Agency in Paris forecast that China will drive a surge in world energy demand over the next quarter century, as straining supply enhances the market share of the Organization of Petroleum Exporting Countries and growing coal use undermines efforts to contain global warming.
Chinese Demand
Chinese demand will jump 75 percent, accounting for more than a third of an increase in energy use that will bring global consumption to 16.7 billion metric tons of oil equivalent by 2035, the IEA forecast in its annual World Energy Outlook.
“The IEA’s report, their annual world outlook, came out with some interesting facts about emerging markets that’s provided a bit of an interesting background,” said Matt Smith, a commodities analyst for Summit Energy in Louisville, Kentucky.
Oil volume in electronic trading on the Nymex was 594,704 contracts as of 4:39 p.m. in New York. Volume totaled 582,052 contracts yesterday, 17 percent below the average of the past three months. Open interest was 1.49 million contracts.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.
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