Bloomberg News

Oil Trades Near 4-Day High as U.S. Supply Counters Debt Review

July 13, 2011

July 14 (Bloomberg) -- Oil traded near a four-day high in New York after signs of rising crude demand in the U.S. countered speculation the world’s biggest consumer of the commodity may face a credit rating downgrade.

Futures were little changed, after slipping as much as 0.5 percent, after Moody’s Investors Service put the U.S. under review for a rating downgrade as talks to raise its $14.3 trillion debt limit stall. Prices advanced 0.6 percent yesterday after the Energy Department said oil stockpiles fell for a sixth week and gasoline supplies dropped for a fourth week.

“We are in the prime U.S. drive season and we think it’s been better than the last couple of years,” said David Lennox, an analyst at Fat Prophets in Sydney, who predicts oil in New York will average $115 this year. “We do think that the U.S. consumer has recovered a little bit from the lows of 2008-09.”

Crude for August delivery was at $97.90 a barrel, down 15 cents, in electronic trading on the New York Mercantile Exchange at 1:18 p.m. Sydney time. The contract yesterday rose 62 cents to $98.05, the highest close since July 7. Prices are 27 percent higher the past year.

Brent oil for August settlement was at $118.62 a barrel, down 16 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract traded at a premium of $20.78 a barrel to U.S. futures, compared with a record close of $22.29 on June 15.

Oil Stockpiles

U.S. crude stockpiles declined 3.1 million barrels last week to 355.5 million, the Energy Department report showed. They were projected to drop 1.5 million barrels, according to a Bloomberg News survey. The industry-funded American Petroleum Institute said in a separate report on July 12 that inventories rose 2.34 million barrels.

Gasoline supplies fell 840,000 barrels to 211.7 million last week, the report showed. A 500,000-barrel gain was projected, according to the survey. Distillate inventories, a category which includes heating oil and diesel, rose 2.97 million barrels to 145 million, compared with a median forecast for a 500,000-barrel increase.

“Traders saw this week’s DOE report as a bullish report,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in an e-mailed note today. “These headline figures combined with a decline in refinery utilization to bring buyers into the market.”

Refinery utilization fell to 88 percent last week from 88.4 percent, the Energy Department report showed.

Fibonacci Retracement

Oil may extend its rally in New York after breaching technical resistance along the one-year Fibonacci retracement at $98 a barrel yesterday, according to data compiled by Bloomberg. Front-month futures also settled above the 50-day moving average, at $97.89 today, for the first time in 10 weeks. A breach of resistance usually means prices will advance further.

The U.S., rated Aaa since 1917, was put on review for the first time since 1995 on concern the debt limit won’t be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes even though the risk remains low, Moody’s said yesterday. The rating would likely be reduced to the Aa range and there is no assurance that Moody’s would return its top rating even if a default is quickly cured.

The Organization of Petroleum Exporting Countries pumped more crude in June as Saudi Arabia raised production to 9.7 million barrels a day, the most since February 2006, the Paris- based International Energy Agency said yesterday.

--With assistance from Yee Kai Pin in Singapore. Editors: Alexander Kwiatkowski, Jane, Ching Shen Lee

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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