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Oil Rises to 26-Month High Above $90 on U.S. Supply Forecast

Oil climbed above $90 a barrel to the highest price in two years before a report forecast to show that U.S. crude stockpiles fell for the first time in three weeks.

Futures rose as much as 1.5 percent to trade as high as $90.76 in New York. Inventories declined 1.5 million barrels, or 0.4 percent, in the seven days ended Dec. 3 from 359.7 million a week earlier, the Energy Department will report tomorrow, according to a Bloomberg survey. Oil’s 14-day relative strength index, a measure of how fast prices have risen or dropped in that period, was at 67.7, close to the 70 level traders typically see as a signal that prices may reverse.

“In the U.S. itself the excess in inventories has come off very, very quickly,” said Amrita Sen, an analyst at Barclays Plc in London. “Over the last five or six weeks, you’ve eroded about 40 million barrels of inventories. It’s tightening, and it should continue to erode as we progress into the new year.”

Crude for January delivery gained as much as $1.38 a barrel to the highest price since Oct. 8, 2008 in electronic trading on the New York Mercantile Exchange. It traded at $90.69 at 1:56 p.m. London time. Brent crude for January settlement advanced as much as $1.41, or 1.5 percent to $92.86 a barrel on the London- based ICE Futures Europe exchange.

Futures in New York recouped an earlier 0.7 percent decline as the Dollar Index, a measure of the currency against six major peers, slipped 0.3 percent. Oil climbed yesterday amid speculation that the U.S. may extend economic stimulus measures and on forecasts of cold weather for the U.S. and Europe. Crude gained 13 percent this year.

The Energy Department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.

Longest Sequence

Gasoline supplies are expected to have risen 875,000 barrels, or 0.4 percent, from 210.2 million, Bloomberg’s survey showed. It would be the third weekly gain, the longest sequence of increases since August. Stockpiles of distillate fuel, a category that includes heating oil and diesel, probably decreased 550,000 barrels, or 0.3 percent, from 158.1 million.

“The expectations are that we’ll see some inventory drawdowns tomorrow,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “A weaker dollar is helping support crude, though macro sentiment is mixed. The market is overbought, and any escalation in concern about risk could trigger profit-taking.”

The industry-funded American Petroleum Institute will release weekly supply and demand data later today. MasterCard Inc. will also publish its weekly SpendingPulse report with data on U.S. gasoline demand.

The Organization of Petroleum Exporting Countries, responsible for 40 percent of global oil supplies, will meet to review its production quota on Dec. 11 in Quito, Ecuador. The organization hasn’t changed its output target since 2008.

To contact the reporter 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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