Bloomberg News

Oil Climbs for Second Day on Forecast U.S. Stockpiles May Drop

July 06, 2011

July 6 (Bloomberg) -- Oil rose for a second day in New York on speculation crude inventories declined for a fifth week in the U.S., signaling fuel demand may be climbing in the world’s biggest consumer of the commodity.

Futures gained 0.6 percent, after advancing 2.1 percent yesterday, before an Energy Department report tomorrow that may show crude stockpiles dropped 2.5 million barrels last week, the longest streak since January. The industry-funded American Petroleum Institute will report its own data today. Oil supplies have dropped 3.8 percent since the end of May amid U.S. peak gasoline demand and the start of the Atlantic hurricane season.

“Inventories drawing, the summer drive-time and the hurricane season all provide that flavor for a market that wants to continue higher,” said Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, who predicts oil in New York will average $100 a barrel this year. “I’d expect more gains to be had in the oil market.”

Crude for August delivery rose as much as 59 cents to $97.48 a barrel, in electronic trading on the New York Mercantile Exchange and was at $97.45 at 12:25 p.m. Singapore time. The contract yesterday gained $1.95 to $96.89, the highest settlement since June 14. Futures have gained 35 percent in a year.

Floor trading was closed July 4 for the U.S. Independence Day holiday and electronic trades were booked with yesterday’s transactions for settlement purposes.

Oil rose yesterday as data showed orders placed with U.S. factories increased in May, indicating manufacturing may rebound from a slowdown.

Brent oil for August delivery rose 24 cents to $113.85 a barrel on the ICE Futures Europe exchange. The European benchmark contract was at a premium of $16.65 to U.S. futures. The spread reached a record $22.29 on June 15.

Gasoline Inventories

U.S. crude inventories shrank 0.7 percent to 357 million in the week ended July 1, according to the median of 11 analyst estimates before the Energy Department report. All of the respondents forecast a decline.

Gasoline supplies probably increased 1 million barrels from 213.2 million, according to the survey. It will be the first gain in three weeks.

Barclays Plc increased its 2012 estimates for North Sea Brent and U.S. benchmark West Texas Intermediate crude grades.

The bank raised its Brent forecast to $115 a barrel, up $10 from its previous estimate on March 24, Barclays analysts led by Paul Horsnell in London said in a report yesterday. It increased its 2012 outlook for U.S. futures by $4 to $110.

Saudi Prices

Saudi Arabian Oil Co., the world’s largest crude exporter, cut official selling prices for August shipments of light crudes to customers in the U.S. and Asia and raised prices for medium and heavy grades sold in those markets.

The state-owned producer, known as Saudi Aramco, said it cut the price for Arab Extra Light crude shipped to Asia by 50 cents a barrel to $2.95 a barrel above the average of the Oman and Dubai grades, the Gulf benchmarks used by traders in Asia. It lowered the Arab Light price by 10 cents a barrel to a premium of $1.35 above the Oman-Dubai average.

The first tropical storm of the Atlantic hurricane season, which runs from June 1 to Nov. 30, formed last week. Arlene dissipated over the Sierra Madre mountains in Mexico after forming last week, the National Hurricane Center said July 1.

--With assistance from Christian Schmollinger in Singapore. Editors: Jane, Ching Shen Lee, Alexander Kwiatkowski

To contact the reporter on this story: Ben Sharples in Melbourne at

To contact the editor responsible for this story: Alexander Kwiatkowski at

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