Oil Trades Near 4-Day High as U.S. Supply Counters Debt Review

Oil traded near a four-day high in New York after signs of shrinking crude supplies in the U.S. countered speculation the world’s biggest consumer of the commodity may face a credit-rating downgrade.

Futures swung between gains and losses after Moody’s Investors Service put the U.S. rating under review as talks to raise its $14.3 trillion debt limit stall. The Energy Department said yesterday that oil stockpiles fell for a sixth week and gasoline supplies dropped.

“It’s a worry, this downgrade,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “That’s a scary thing, the uncertainty this is creating in the market.”

Crude for August delivery was at $98.16 a barrel, up 11 cents, in electronic trading on the New York Mercantile Exchange at 3:22 p.m. Singapore time. The contract yesterday rose 62 cents to $98.05, the highest close since July 7. Prices are 27 percent higher the past year.

Brent oil for August settlement was at $118.34 a barrel, down 44 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract traded at a premium of $20.18 a barrel to U.S. futures, compared with a record close of $22.29 on June 15.

Monetary Easing

Federal Reserve Chairman Ben S. Bernanke signaled the central bank has more tools for monetary easing should the economy weaken and stymie efforts to generate jobs for 14.1 million unemployed Americans.

The Fed could pledge to keep the main interest rate at a record low and hold its balance sheet at $2.87 trillion for a longer period, Bernanke said yesterday in congressional testimony. It could also buy more bonds, increase the average maturity of its securities holdings or cut the interest rate it pays banks on their reserves, he said.

“If the Fed has the power to do this on its own, people would come back into the oil market and buy it up,” said Mitsubishi’s Nunan.

Investors tend to buy dollar-denominated commodities when the currency weakens.

Gasoline Demand

U.S. crude stockpiles declined 3.1 million barrels last week to 355.5 million, the Energy Department report showed. They were projected to drop 1.5 million barrels, according to a Bloomberg News survey. The industry-funded American Petroleum Institute said in a separate report on July 12 that inventories rose 2.34 million barrels.

The country’s gasoline demand slumped 293,000 barrels last week to 9.02 million barrels a day, the Energy Department said. That’s the lowest since the week of May 6. Overall U.S. oil consumption averaged 18.9 million barrels daily in the period to July 8, down 1.4 percent from the same time a year ago.

Gasoline supplies fell 840,000 barrels to 211.7 million last week, the report showed. A 500,000-barrel gain was projected, according to the survey. Distillate inventories, a category which includes heating oil and diesel, rose 2.97 million barrels to 145 million, compared with a median forecast for a 500,000-barrel increase.

Refinery utilization fell to 88 percent last week from 88.4 percent, the Energy Department report showed.

To contact the reporter on this story: Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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