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Oil Fluctuates as U.S. Stockpiles Climb Before OPEC Meets

Oil fluctuated after a industry report showed stockpiles rising in the U.S., the world’s biggest crude consumer, and as OPEC delegates gathered in Vienna to decide the group’s production quota.

Futures were little changed after gaining for the first time in six days yesterday. Crude inventories increased by 4.27 million barrels last week, the most since August, data from the American Petroleum Institute showed. An Energy Department report today may show supplies shrank by 2.5 million barrels, according to a Bloomberg News survey. Most members of the Organization of Petroleum Exporting Countries have signaled they’ll keep the output target unchanged at 30 million barrels a day.

“The ceiling for this meeting we think won’t change,” David Lennox, an analyst at Fat Prophets in Sydney, said in a Bloomberg Television interview today. “We do see that supply and demand probably at this particular point in time are pretty equally balanced.”

Crude for January delivery was at $85.90 a barrel, up 11 cents, in electronic trading on the New York Mercantile Exchange at 3:12 p.m. Singapore time. The contract gained 23 cents to $85.79 yesterday, the highest close since Dec. 7. Prices are down 13 percent this year.

Brent for January settlement rose 35 cents to $108.36 a barrel on the London-based ICE Futures Europe exchange and was at a premium of $22.46 to West Texas Intermediate. The European benchmark contract is heading for its highest-ever average annual price, at $111.77 a barrel so far this year.

OPEC Output

Oil in New York has technical support along an upward- sloping trend line on the daily chart, around $85.73 a barrel today, according to data compiled by Bloomberg. A sustained drop below this line, which connects the intraday lows of June and November, will signal a so-called downside breakout, when losses tend to accelerate.

While OPEC’s own forecasts show that it’s pumping more than consumers need, Saudi Arabia, Iraq, Iran, the United Arab Emirates, Angola and Ecuador have indicated that supply and demand are approximately in balance. The group, which provides about 40 percent of the world’s crude, is expected to maintain its output quota, according to a Bloomberg survey of 18 analysts published last week.

Total production from all 12 OPEC nations slid to an 11- month low of 30.78 million barrels a day last month, according to a monthly report from the group yesterday that cited secondary sources for its data. That’s still above the official cap and about 1.03 million barrels a day more than the projected average demand for OPEC crude next year, the report said.

“The ceiling is more for optics,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong, who forecasts Brent crude will trade in a range around $100 a barrel in the medium term. “There’s no reason to send a signal,” on prices right now, he said.

U.S. Inventories

Gasoline stockpiles in the U.S. increased by 2.76 million barrels last week, the API data showed. They are forecast to rise by 2 million in the government report, according to the median estimate of 11 analysts in the Bloomberg News survey. Distillate inventories, a category that includes diesel and heating oil, rose by 2.24 million barrels compared with an estimate for the Energy Department data of 1.1 million.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

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

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