Crude Trades Near One-Week High After Unexpected Drop in U.S. Stockpiles

Oil traded near the highest in more than a week in New York after a government report showed an unexpected drop in U.S. crude inventories on increased refinery operating rates.


Futures were little changed after climbing 3.3 percent yesterday. The Energy Department said stockpiles slipped 15,000 barrels last week to 370.3 million. Supplies were projected to rise 1.7 million barrels, according to analysts surveyed by Bloomberg News.


“Oil prices gained after a bullish U.S. Energy Department report,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in an e-mailed note today. The data showed an “unexpected dip” in crude stockpiles, he said.


Crude for June delivery was at $100.07 a barrel, down 3 cents, in electronic trading on the New York Mercantile Exchange at 10:36 a.m. Sydney time. It advanced $3.19 to $100.10 yesterday, the highest settlement since May 10. The contract expires today. The more actively-traded July future fell 15 cents to $100.41. Prices are up 43 percent the past year.


Brent crude for July settlement was at $112.32 a barrel, up 2 cents, on the London-based ICE Futures Europe exchange. The contract yesterday increased $2.31, or 2.1 percent, to $112.30, the highest settlement since May 13.


Imports Decline


Imports of crude dropped 4.4 percent to 8.57 million barrels a day, the Energy Department report showed. Fuel imports declined 14 percent to 2.26 million barrels a day, the lowest since the week ended March 11.


Supplies of oil at Cushing, Oklahoma, the delivery point for the New York-traded West Texas Intermediate grade, fell 1.59 million barrels to 40 million. TransCanada Corp.’s 591,000 barrel-a-day Keystone pipeline was shut May 7 until May 13 after a leak in North Dakota. It runs from Alberta to Cushing.


Gasoline inventories in the U.S. rose 119,000 barrels to 205.9 million in the week ended May 13. They were forecast to increase 950,000 barrels, according to the median of 16 analyst responses in the Bloomberg News survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, slid 1.16 million barrels to 143.1 million, the lowest since April 2009.


Refineries operated at 83.2 percent of capacity, the most since the week ended April 1, the report showed.


Alberta Fires


Wildfires in northern Alberta, Canada, shut a pipeline that carries crude from oil-sands projects and may halt more than 55,000 barrels of daily output as companies run short of storage space for their production.


Fires forced Plains All American Pipeline LP to stop cleanup work from an earlier oil spill and shut down its Rainbow pipeline system on May 15. Canadian Natural Resources Ltd., Cenovus Energy Inc. and other producers have said they may curtail output because of the pipeline disruption.


Canada was the biggest source of U.S. oil imports, last year, providing 1.97 million barrels a day, according to the Energy Department.


A Republican proposal to expand offshore drilling was blocked in the U.S. Senate, a day after Democrats failed to advance legislation that would repeal $21 billion in tax breaks for five multinational oil companies.


Supporters of the legislation fell 18 votes short of the 60 needed to advance, with five Republicans joining Democrats in opposition. The tax repeal measure was eight votes short of the required threshold on May 17.


Middle East


Oil prices advanced 9 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya.


Yemeni President Ali Abdullah Saleh yesterday refused to sign a Gulf Cooperation Council proposal to begin a transition of power, objecting to the inclusion of some opposition members in the deal, said Abdu al-Janadi, the deputy information minister. Saleh’s decision came after the U.S. stepped up pressure on the Yemeni leader to accept the proposal as a step toward ending protests against the regime.


The most-actively traded oil option yesterday was the July $90 put, giving investors the right to sell crude for delivery that month at $90, which fell 43 percent to 85 cents. The second-most active contract was the July $105 call, giving investors the right to buy oil at that price. It rose 62 percent to $2.16.


Implied volatility for at-the-money options expiring in July, a measure of expected price swings in futures and a gauge of options prices, was 35.1 percent, down from 36.1 percent on May 17. Open interest on oil futures was 1.58 million contracts, the lowest level since April 27.


Mississippi Floods


The engorged Mississippi River is cresting in the state that bears its name, rising to major flood stage and above in towns famous for Civil War battles, riverboat landings and antebellum homes.


In Louisiana, 16 gates are open on the Morganza spillway, diverting the Mississippi’s excess into the Atchafalaya River basin. The opening of the spillway for the first time since 1973 eased the threat of flooding for Baton Rouge, New Orleans and a major petrochemical zone.
(Source:Bloomberg)