Bloomberg News

Oil Near 2-Week High as Spending Counters Forecast Supply Gain

August 30, 2011

Aug. 30 (Bloomberg) -- Oil traded near the highest in almost two weeks in New York as signs of a strengthening U.S. economy countered speculation that crude stockpiles are increasing in the world’s biggest consumer of the commodity.

West Texas Intermediate, the main grade traded in New York, fluctuated before an Energy Department report tomorrow that may show U.S. inventories climbed last week. Oil rose earlier after a Commerce Department report said consumer spending increased more than forecast in July. Prices also gained as refineries returned to normal rates after Hurricane Irene passed.

“With the improvement in consumer spending in the U.S., one would perhaps think that there may be a glimmer of hope in confidence returning,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who predicts crude in New York will average $115 a barrel this year. “All avenues still point to the price of West Texas and Brent probably moving higher.”

Crude for October delivery was at $87.34 a barrel, up 7 cents, in electronic trading on the New York Mercantile Exchange at 5:28 p.m. Sydney time. The contract yesterday climbed $1.90, or 2.2 percent, to $87.27, the highest settlement since Aug. 17. Prices have gained 17 percent the past year.

Brent oil for October settlement gained 49 cents, or 0.4 percent, to $112.37 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $24.99 to U.S. West Texas Intermediate futures, compared with a record close of $26.21 on Aug. 19.

Consumer Spending

The Commerce Department report showed U.S. consumer spending in July climbed 0.8 percent, the biggest gain since February. The median estimate of 74 economists surveyed by Bloomberg News was for a 0.5 percent increase.

PBF Energy Partners LP returned its Paulsboro, New Jersey and Delaware City, Delaware refineries to normal rates, according to an Energy Department website. ConocoPhillips may attempt to start an alkylation unit at its 238,000 barrel-a-day Bayway plant in New Jersey today after shutting the refinery because of Irene, according to a person familiar with the plant’s operations.

Buckeye Partners LP said operations on its pipelines to Auburn and Brooklyn, New York, resumed and deliveries to Buffalo, New York, are scheduled to start today. Deliveries to John F. Kennedy and LaGuardia airports in New York City from storage in Linden, New Jersey, will begin as inventory levels allow, the Houston-based company said in a bulletin to shippers yesterday.

Oil Stockpiles

U.S. crude-oil inventories may have climbed by 875,000 barrels last week as refineries cut operating rates in preparation for Irene and the government released barrels from the Strategic Petroleum Reserve, according to the median of eight analyst estimates in a Bloomberg survey.

The release of emergency stockpiles is almost complete. The department delivered 25.58 million barrels of oil from July 17 to Aug. 28, according to a statement on its website. The supplies are part of a 30.64 million-barrel sale to companies in cooperation with the Paris-based International Energy Agency, which sought to counter lost Libyan output from the conflict between rebels and the regime of Muammar Qaddafi.

The Energy Department report will show gasoline stockpiles fell 900,000 barrels last week, according to the survey. Distillate-fuel inventories, a category that includes heating oil and diesel, probably increased 900,000 barrels.

Force Majeure

The CME Group Inc. declared a force majeure for heating oil shipments into New York for August because of Hurricane Irene, the company said in a statement yesterday. The legal clause allows companies to miss scheduled shipments because of circumstances beyond their control. Heating oil futures today climbed 79 cents, or 0.3 percent, to $3.0181 a gallon.

Hedge funds and other money managers cut bullish bets on Brent crude by 12 percent in the week ended Aug. 23, according to data from ICE Futures Europe. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 43,489 contracts, the London-based exchange said yesterday in its weekly Commitment of Traders report. Net-long positions fell by 6,119 contracts from 49,608 a week earlier.

--Editors: Paul Gordon, Baldave Singh

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Paul Gordon in Hong Kong at pgordon6@bloomberg.net


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