Bloomberg News

Oil Trades Near Three-Day High on Retail Sales, Inventory Drop

June 14, 2011

June 15 (Bloomberg) -- Oil traded near a three-day high in New York after reports showed U.S. retail sales fell less than expected and crude supplies slipped a second week, stoking speculation fuel demand in the world’s biggest crude consumer will increase.

Futures were little changed after climbing the most in almost four weeks yesterday. Sales by U.S. retailers dropped 0.2 percent in May, less than the median forecast for a 0.5 percent decline in a Bloomberg News survey, Commerce Department figures showed. The industry-funded American Petroleum Institute said crude stockpiles fell 3.01 million barrels last week.

“There’s a recovery going on. It’s hit a bit of a short- term patch of weakness but we still see the second half of the year as being pretty strong,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicted crude will average $113 a barrel in the third quarter. “Higher oil prices might be having a marginal impact on growth in the advanced economies but overall there’s nothing that would suggest a double-dip recession.”

Crude for July delivery was at $99.29 a barrel, down 8 cents, in electronic trading on the New York Mercantile Exchange at 11:22 a.m. Sydney time. The contract yesterday gained $2.07, or 2.1 percent, to $99.37 in the biggest percentage increase since May 18. Prices are 29 percent higher the past year.

Retail Sales

Brent oil for July delivery climbed 74 cents, or 0.6 percent, to $120.90 a barrel on the London-based ICE Futures Europe exchange. The more actively traded August contract fell 21 cents to $119.14.

U.S. retail sales fell last month for the first time since June 2010. Excluding the biggest slide in auto sales in more than a year, purchases climbed 0.3 percent, according to the Commerce Department figures.

U.S. crude stockpiles dropped to 363 million barrels, the lowest in seven weeks, according to the American Petroleum Institute report. Gasoline stockpiles climbed 1.13 million barrels to 213.5 million barrels, the API said. Oil-supply totals from the API and the Energy Department have moved in the same direction 72 percent of the time over the past year.

The institute 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.

Brent Premium

The Energy Department report today may say crude inventories slid 1.8 million barrels from 368.9 million, according to a Bloomberg News survey of 13 analysts. Gasoline supplies probably rose 1.05 million barrels, the survey shows.

Brent, the European benchmark contract traded at a premium of $21.60 a barrel to U.S. futures today. The difference between front-month contracts in London and New York reached a record close of $21.80 on June 13.

The gap is widening because of flows of light, sweet crude to Europe and Asia instead of the U.S. Gulf Coast, Goldman Sachs said in a note yesterday. The premium is “primarily driven by the weakening of U.S. Gulf Coast light-sweet crude oil prices relative to Brent crude, not a Cushing bottleneck,” Goldman analysts including New York-based David Greely said.

Whereas in the past the gap was determined by excessive stockpiles at the U.S. storage hub in Cushing, Oklahoma, the latest divergence is more linked to shortages of blends similar to Brent crude, BNP Paribas SA said yesterday in a separate report.

Supplies at Cushing slipped 1.02 million barrels to 38.9 million in the week ended June 3, the Energy Department said in a report last week.

Oil prices are “hurting” the global economy and may stall its recovery, Fatih Birol, chief economist at the International Energy Agency, said yesterday.

--Editors: Paul Gordon, Ryan Woo

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 in Singapore at akwiatkowsk2@bloomberg.net


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