Bloomberg News

Oil Gains a Second Day on Signs U.S. Crude Stockpiles May Drop

September 13, 2011

Sept. 13 (Bloomberg) -- Oil rose for a second day on speculation crude stockpiles shrank last week in the U.S., the world’s biggest consumer of the commodity, after storms curtailed offshore production.

Prices advanced as much as 1.2 percent before an Energy Department report tomorrow that may show oil supplies fell for a second week. Inventories at Cushing, Oklahoma, the delivery point for New York-traded futures, dropped 4.7 percent to 33.8 million barrels on Sept. 9, according to data from DigitalGlobe Inc. Output in the Gulf of Mexico, which accounts for 27 percent of U.S. supply, was cut 61 percent last week after Tropical Storm Lee shut production platforms.

“It could be we’ll see some draws because of a blockage of imports and a reduction of output in the Gulf,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “People still feel the market fundamentals aren’t that bad. The price structures are still signaling a strong market.”

Crude for October delivery climbed as much as $1.02 to $89.21 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.90 at 2:55 p.m. Singapore time. The contract yesterday increased 95 cents to $88.19. Prices are 15 percent higher the past year.

Brent oil for October settlement gained as much as 87 cents, or 0.8 percent, to $113.12 a barrel on the London-based ICE Futures Europe Exchange. The European benchmark contract closed at a premium of $24.06 to U.S. futures yesterday, the smallest since Aug. 23 and down from a record close of $26.87 on Sept. 6. The spread is at $24.01 today.

Brent Backwardation

The October Brent contract is at a premium of $2.09 a barrel to the November future, the most since June 15. This market structure, where prompt supplies are more expensive than later deliveries, is known as backwardation and signals demand for near-term supplies is greater than for future shipments.

The Energy Department report may show crude inventories slid 3 million barrels last week, according to the median of 10 analyst estimates in a Bloomberg News survey. Gasoline supplies probably fell 500,000 barrels, the survey shows. The industry- funded American Petroleum Institute will report its own data today.

Stockpiles held in floating-roof tanks at the Cushing hub declined 1.68 million barrels, satellite images taken by the Longmont, Colorado-based DigitalGlobe show. The Energy Department said last week that Cushing inventories, including floating and fixed tanks, totaled 32.7 million barrels as of Sept. 2. Cushing is the largest crude-trading and storage hub in the U.S. with a working storage capacity of 48 million barrels.

Libya Output

Brent’s premium to WTI shrank yesterday after the Organization of Petroleum Exporting Countries said Libya will be able to restore most of its oil output in six months.

Full production from Libya may resume in 18 months, the Organization of Petroleum Exporting Countries said yesterday in its monthly report. The country may pump 1 million barrels a day in six months, OPEC said. It was producing about 1.6 million before fighting began between rebels and forces loyal to former leader Col. Muammar Qaddafi.

An oil tanker is sailing to the Libyan port of Mellitah, a sign the nation may be resuming energy exports, ship-tracking data compiled by Bloomberg show.

--With assistance from Christian Schmollinger and Ann Koh in Singapore. Editors: Alexander Kwiatkowski, Christian Schmollinger

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 at akwiatkowsk2@bloomberg.net


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