Bloomberg News

Oil Gains a Second Day in New York as Stockpiles Decline

June 05, 2012

Oil gained a second day in New York before a government report that may show stockpiles dropped for the first time in 11 weeks in the U.S. amid speculation global policy makers will take steps to stimulate economic growth.

Crude fluctuated between gains and losses after rising yesterday for the first time in five days. Finance ministers and central bank governors from the Group of Seven countries will discuss the European debt crisis, Canadian Finance Minister Jim Flaherty said. U.S. crude supplies probably slipped 1 million barrels last week, according to a Bloomberg News survey before an Energy Department report tomorrow.

“Emergency talks for the G7 are a little bit dangerous because they raise expectations,” Ole Hansen, senior manager of trading advisory at Saxo Bank A/S, said by phone from Copenhagen. Crude is “close to a floor” and will trade above $82 a barrel in the near term, he said.

Oil for July delivery gained as much as 94 cents to $84.92 a barrel in electronic trading on the New York Mercantile Exchange and was at $84.20 at 1:49 p.m. London time. Earlier it lost 67 cents. The contract yesterday rose 0.9 percent to $83.98, the highest close since May 31. Prices are 15 percent lower this year.

Brent oil for July settlement increased as much as 78 cents, or 0.8 percent, to $99.63 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to West Texas Intermediate was at $14.67, from $14.87 yesterday.

Bollinger Band

New York crude has rebounded since closing below its lower Bollinger Band on June 1 for the first time in more than three weeks, according to data compiled by Bloomberg. The indicator is at about $82.90 today. Buy orders tend to be clustered near chart-support levels.

Oil prices are unlikely to collapse as they did in 2008, according to Peter Voser, the chief executive officer of Royal Dutch Shell Plc. (RDSA) Crude is dipping because the geopolitical factors that drove it higher are becoming less dominant, he said at the World Gas Conference in Kuala Lumpur today. Prices will probably rise in the longer term as supply struggles to meet a projected increase in global demand, he said.

Crude in New York dropped from a record high of $147.27 a barrel to $32.40 between July and December 2008 as the global recession sapped demand. It traded as high as $110.55 a barrel on March 1 this year amid speculation that international sanctions against Iran threatened supplies from the world’s fourth-biggest producer. Prices have dropped since Iran resumed talks with the West over its nuclear program.

Refinery Throughput

U.S. crude supplies climbed to a 22-year high in the week ended May 25, according to Energy Department data. Companies operated refineries at 89.6 percent of capacity last week, up 0.5 percentage point from the prior week and the highest level since August, the Bloomberg survey of nine analysts showed. Supplies of gasoline and distillates, a category that includes diesel and heating oil, may have each gained 1 million barrels.

“We would like to see some of that substantial stockpile reduced,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty in Sydney. “The markets seem to have come to the conclusion all at once that we were in oversold territory. West Texas has moved back into an old trading range between $82 and $88 a barrel and I expect those bounds to hold the contract over the course of this week.”

The American Petroleum Institute will release separate inventory data today. The API 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.

Producers in the Organization of Petroleum Exporting Countries are likely to maintain oil supplies at current levels when they meet in Vienna this month, Maria van der Hoeven, the executive director of the International Energy Agency, said today in an interview in Kuala Lumpur.

“It’s likely that they’ll be unwilling to do anything that might risk prematurely tightening markets once again at a time of such economic uncertainty,” van der Hoeven said. “We are fairly confident that OPEC’s decision will be as it has been until now, to supply the market as they did.”

To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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