Oil Rises as Fuel Supply Drop Offsets Crude Stockpiles Increase

  • Crude inventories increase the first time since August: EIA
  • Gasoline, distillate supply fell as refiners perform work

How Saudi Arabian Pressure Can Assure OPEC Deal

Oil rose as declines in U.S. fuel supplies and crude inventories at the key American storage hub offset the first nationwide oil stockpile gain since August.

Crude stockpiles rose 4.85 million barrels last week, the bulk of which occurred on the East Coast, according to the Energy Information Administration. Supplies at Cushing, Oklahoma, the delivery point for U.S. oil futures, fell 1.32 million barrels to the lowest level this year. Gasoline and distillate inventories dropped as refineries processed the least crude since February while they performed seasonal maintenance.

"Today’s inventories showed a large one-off build on the East Coast, this is normally volatile and likely to reverse," said Kurt Billick, the founder and chief investment officer of Bocage Capital LLC in San Francisco. "The key areas showed a shallower crude build and relatively constructive product inventories."

Oil has traded near $50 a barrel as investors weigh whether the Organization of Petroleum Exporting Countries will execute plans to curb output. Russia has said it’s ready to participate with the group in a “technical exchange” later this month in Vienna to set a road map for production, while an OPEC committee will try to resolve differences over how much individual members should pump.

Holding Pattern

West Texas Intermediate for November delivery climbed 26 cents to close at $50.44 a barrel on the New York Mercantile Exchange. Total volume traded was 48 percent above the 100-day average.

Brent for December settlement rose 22 cents to $52.03 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $1.18 premium to December WTI.

"We’re in a holding pattern as we figure what runway OPEC will choose to land on," said Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC who helps manage $14.1 billion. "I don’t think we will see much movement until we know whether they decide on a cut or a freeze."

The nationwide crude increase was more than twice the 2 million barrel gain forecast by analysts surveyed by Bloomberg, and well above a 2.7 million barrel increase reported Wednesday by the industry-funded American Petroleum Institute. 

Ample Stockpiles

Crude stockpiles along the East Coast, known as PADD 1, increased by 3.06 million barrels to 18.3 million. The nationwide gain left U.S. crude supplies at 474 million in the week ended Oct. 7, according to EIA data. Stockpiles remain at the highest seasonal level in more than 20 years.

Crude imports advanced 2 percent to 7.86 million barrels a day last week. Production decreased slipped to 8.45 million barrels a day.

Refinery inputs of crude and other feedstocks fell to 15.8 million barrels a day, the lowest level since February. Refineries usually cut back on operations in September and October after the peak-demand driving season comes to an end and before consumption rebounds as temperatures fall.

Stockpiles of distillate fuel, a category that includes diesel and heating oil, dropped 3.75 million barrels, the biggest decline since January. Gasoline supplies fell 1.91 million barrels to 225.5 million.

"The mix of higher crude and lower product supplies cancelled out each other, so the move was small," said Michael Lynch, president of the Strategic Energy & Economic Research in Winchester, Massachusetts. "We’re all waiting to see what OPEC does next month."

The scale of the internal obstacles OPEC must resolve was revealed Wednesday as the group’s latest output estimates showed a half-million-barrel difference of opinion over how much two key members are pumping. Venezuela and Iraq’s own figures for how much crude they produced in September were significantly higher than estimates compiled by OPEC from so-called secondary sources. The two countries are disputing the data, which could determine the production target for each country when caps on members’ output are decided next month.

Oil-market news:

  • Hedge-fund manager Pierre Andurand said he expects oil to reach $60 a barrel over the next three months and $70 next year as Saudi Arabia agrees to cut production.
  • Chinese crude imports rose to a record 8.08 million barrels a day in September, according to data released by the General Administration of Customs on Thursday.
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