Crude Oil Climbs to Two-Week High After U.S. Reports Drop in Fuel Supplies

Crude oil rose to a two-week high after a U.S. Energy Department report showed that gasoline stockpiles tumbled to the lowest level since August 2009.

Futures climbed 0.5 percent after the department said gasoline inventories fell 2.51 million barrels to 205.6 million last week. Supplies of distillate fuel, a category that includes heating oil and diesel, declined 1.81 million barrels to 146.5 million. Prices briefly dropped on a 6.16 million-barrel gain in crude oil stockpiles and surging imports.

“Gasoline supplies are definitely on the light side,” said Kyle Cooper, director of research for IAF Advisors in Houston. “With gasoline supplies falling and prices climbing, refiners can pay more for oil. They are going to pay more to take delivery of extra barrels of crude because they know they will make money processing it into gasoline.”

Crude oil for June delivery rose 55 cents to $112.76 a barrel on the New York Mercantile Exchange. It was the highest settlement since April 8 when futures climbed to $112.79, a 31- month high. Prices are up 37 percent from a year ago.

Gasoline for May delivery rose 6.22 cents, or 1.9 percent, to end the session at $3.4194 a gallon in New York. It was the highest settlement price since July 14, 2008.

Regular gasoline at the pump, averaged nationwide, increased 1 cent to $3.879 a gallon yesterday, the most since Aug. 3, 2008, AAA said on its website.

Gasoline demand rose 0.8 percent to 9.06 million barrels a day over the past four weeks, 1.6 percent lower than a year earlier, according to the report.

“Gasoline supplies keep dropping despite low demand, because there’s probably a lot of U.S. product being sent overseas,” Cooper said.

Fuel Shipments

U.S. fuel exports averaged a record 2.29 million barrels a day from March 11 through April 8, department data shows.

Crude oil supplies rose 1.7 percent 363.1 million barrels in the week ended April 22, the highest level since November, the report showed. It was the biggest one-week advance since July. Stockpiles were forecast to increase 1.7 million barrels, according to the median of 13 analyst projections in a Bloomberg News survey.

“This was a mixed report,” said Gene McGillian, a broker and analyst with Tradition Energy in Stamford, Connecticut. “Under normal circumstances a crude build of over 6 million barrels and a big increase in imports would be enough to send us much lower. Prices did drop but soon rebounded because we still have falling gasoline and distillate stocks.”

Refineries operated at 82.7 percent of capacity, up 0.2 percentage point from the prior week. That’s down from 89 percent of capacity a year earlier. A 0.9 percentage-point increase was forecast in the Bloomberg News survey.

Crack Spread

The crack spread, or profit from processing three barrels of oil into two of gasoline and one of heating oil, climbed 4.7 percent to $26.77 at 3:40 p.m., based on New York futures prices. The differential widened to $28.518 on April 18, the highest level since May 18, 2007.

Oil also climbed after the Federal Reserve renewed its pledge to stimulate growth with low interest rates and said a pickup in inflation is likely to be temporary. The Fed announcement bolstered equities and sent the dollar lower.

“The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually,” the Federal Open Market Committee said today in its statement after a two-day meeting in Washington. “Increases in the prices of energy and other commodities have pushed up inflation in recent months,” and the Fed expects “these effects to be transitory,” according to the statement.

Equity Rally

The Dow Jones Industrial Average climbed 67.62 points to 12,662.99, and the Standard & Poor’s 500 Index advanced 0.4 percent to 1,352.01 at 3:14 p.m.

The dollar fell 0.7 percent to $1.4749 against the euro, after slipping to $1.4752, the weakest level since December 2009. A drop in the dollar makes commodities priced in the currency more attractive for investors.

Gold for June delivery increased $13.60, or 0.9 percent, to settle at $1,517.10 an ounce on the Comex in New York. The precious metal reached $1,527.70, an intraday record.

Oil has advanced 23 percent in New York this year. Unrest in the Middle East and North Africa has toppled leaders in Egypt and Tunisia and spread to Libya, Algeria, Bahrain, Iran, Oman, Syria and Yemen.

Brent oil for June settlement increased 99 cents, or 0.8 percent, to end the session at $125.13 a barrel on the London- based ICE Futures Europe exchange. It was the highest close since April 8.

Oil volume in electronic trading on the Nymex was 529,841 contracts as of 3:11 p.m. in New York. Volume totaled 448,963 contracts yesterday, 41 percent below the average of the past three months. Open interest was 1.55 million contracts.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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