Oil Rises as Report Shows Supply Decline

Oil rose, rebounding from the biggest drop in three months, after an industry report showed U.S. inventories dropped for the first time in six weeks.

Futures climbed as much as 0.7 percent after the American Petroleum Institute said yesterday that supplies fell 1.37 million barrels last week. A government report at 10:30 a.m. in Washington will show stockpiles gained 2.2 million, a Bloomberg News survey showed. Prices retreated from the day’s high as the dollar rebounded from near a two-week low versus the euro.

“We rose overnight on the API numbers and are still looking for the 10:30 report to show a build of about 2 million barrels,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Expectations of a gain will keep a lid on prices until the release.”

Crude for May delivery increased 44 cents, or 0.4 percent, to $106.51 a barrel at 9:30 a.m. on the New York Mercantile Exchange. The contract traded between $106.06 and $106.86 today. Futures are up 7.8 percent this year.

Brent oil for May settlement gained 24 cents to $124.36 a barrel on the London-based ICE Futures Europe exchange.

The dollar traded at $1.3232 per euro, up from $1.3285 earlier today.

U.S. gasoline stockpiles decreased 2 million barrels in the week ended March 16, according to the median estimate of 11 analysts surveyed by Bloomberg News before today’s Energy Department report. Yesterday, the API said supplies slid 1.39 million barrels.

Saudi Output

Futures in New York dropped 2.3 percent yesterday after Saudi Arabia’s Oil Minister Ali al-Naimi said his country can increase output by 25 percent immediately if necessary. The country has capacity to pump 12.5 million barrels a day and will pump about 9.9 million barrels a day this month and in April, he said yesterday in Doha, Qatar.

Brent crude rallied 11 percent last month, the most in a year, on concern EU and U.S. sanctions against Iran’s nuclear program will disrupt oil shipments. The Persian Gulf nation has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil supplies, in response to an embargo.

ICE Futures Europe will set interval price limits, or “circuit breakers,” on crude, gasoil and gasoline contracts from April 1 to prevent large, fast moves, the exchange said in a statement yesterday.

Brent and West Texas Intermediate crude price movements will be limited to $1.25 per 3 seconds. Gasoil price swings will be capped at $10. Gasoline and heating oil moves will be limited to 3 cents per 3-second period, it said.

“Circuit breakers are all well and good, but right now in the Brent market I’m not sure there’s a need,” said Michael Hewson, an analyst at CMC Markets in London, which handles about $240 million a day in U.S. crude contracts. “They could be announcing this if they were concerned about sharp moves in the price, but that hasn’t happened yet. Brent hasn’t been displaying spikey tendencies.”

To contact the reporters 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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