Crude oil rose to a two-year high after a report showed an unexpected decrease in inventories as imports declined and refineries bolstered operating rates.
Oil climbed 1.3 percent as supplies dropped 3.27 million barrels to 364.9 million last week, the Energy Department said. Stockpiles were forecast to increase 1.5 million barrels, according to a Bloomberg News survey. Inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, fell more than estimated.
“This is a wildly bullish report with draws across the board,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy-research firm. “The crude number came as a surprise. The combination of a big increase in utilization and a drop in imports engendered a substantial decline in stocks.”
Crude oil for December delivery increased $1.09 to $87.81 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 8, 2008. Futures are up 11 percent from a year ago.
Brent crude oil for December settlement rose 56 cents, or 0.6 percent, to $88.89 a barrel on the London-based ICE Futures Europe exchange.
Refineries operated at 82.4 percent of capacity, up 0.6 percentage point from the previous week, the report showed. Crude-oil imports tumbled 5.7 percent to 8.09 million barrels a day, the lowest level since January.
Supplies of distillate fuel fell 4.97 million barrels to 159.9 million last week, the seventh straight decline, according to the department. It was the biggest drop since February 2007. Inventories were forecast to slip 2 million barrels, according to the median of 15 analyst estimates in the Bloomberg survey.
Consumption of distillate fuel surged 7 percent to 4.39 million barrels a day, the highest level since August 2008, the report showed. Demand in the week ended Nov. 5 was up 24 percent from a year earlier.
“The large jump in distillate demand year-on-year will bear watching,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund focusing on energy. “This could be an emerging trend that signals not only heating demand but also an uptick in economic activity.”
Gasoline stockpiles dropped 1.92 million barrels to 210.3 million, the lowest level since the week ended Nov. 20, 2009. A 1 million barrel fall was projected.
“There are fundamental reasons for today’s rise,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “The gasoline and distillate supply declines have been massive.”
Gasoline for December delivery climbed 5.12 cents, or 2.3 percent, to $2.2362 a gallon in New York, the highest settlement since May 4.
Heating oil for December settlement increased 3.52 cents, or 1.5 percent, to end the session at $2.4419 a gallon. It was the highest settlement price since Oct. 8, 2008.
Prices also rose after the number of Americans filing initial jobless claims declined, bolstering optimism that the U.S. economic rebound will accelerate. The Labor Department said applications for jobless benefits dropped by 24,000 to 435,000, the lowest level in four months.
The number of people asking for assistance was projected to fall to 450,000, according to the median forecast of 46 economists in a Bloomberg News survey.
Goldman Sachs Projection
Global economic growth will drive oil demand and reduce inventories, which are still “exceptionally high” in developed countries including the U.S., Goldman Sachs Group Inc. said in a report dated yesterday. Spare capacity held by the Organization of Petroleum Exporting Countries will decline as the 12-member group, which pumps 40 percent of the world’s oil, boosts supply to meet demand, the bank said.
“Despite the recent rally, we believe that forward price levels offer good hedging opportunities,” Goldman analysts, led by Allison Nathan in New York, said in the report. “We continue to expect improving fundamentals will provide additional support to prices.”
The next target for the December oil contract is $88.33, which is close to a 76.4 percent Fibonacci retracement of the range generated by this year’s high of $93.55 on May 3 and a low of $71.50, Schork said.
“Once we break through the retracement the market will soon head to $90,” Schork said. “The bulls have been anticipating the moment.”
Oil volume on the Nymex was 779,884 contracts as of 2:32 p.m. in electronic trading in New York. Volume totaled 685,832 contracts yesterday, 2.6 percent below the average of the past three months. Open interest was 1.49 million contracts.
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