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Crude Oil Rises Near 3-Year High After Larger-Than-Expected Supply Decline
London, Nov. 17 (Bloomberg) -- Crude oil rose near a three-
year high after U.S. inventories dropped more than expected,
raising concern that supplies could run thin in the next few
months as the Northern Hemisphere winter lifts demand.
Crude oil supplies last week fell by 2.49 million barrels or
0.8 percent, the American Petroleum Institute said yesterday,
leaving inventories 10 percent lower than in April, when OPEC
slashed output to end a glut. Analysts expected a drop on average
of 1.1 million to 1.9 million barrels, a Bloomberg survey said.
``We are approaching inventory levels that will make it
difficult to operate,' said Jack Kellet, a trader at Credit
Lyonnais Rouse Ltd. ``It's a vicious circle now because people
are reluctant to build stocks with prices this high.'
Crude oil for January settlement gained as much as 41 cents,
or 1.7 percent, to $24.95 a barrel on the International Petroleum
Exchange, more than double the price a year ago. Crude oil for
December delivery on the New York Mercantile Exchange was up 39
cents at $26.09 in electronic trading.
The rise in crude prices sparked a rally in European oil
shares. BP Amoco Plc gained as much as 8.5 pence, or 1.4 percent,
to 640p in London, while Total Fina SA advanced as much as 2.9
euros, or 2.2 percent, to 135 euros in Paris.
Declining inventories in the U.S. is the latest indication
that the Organization of Petroleum Exporting Countries' plan to
end a global surplus has succeeded. The group and four other
nations slashed world supplies by about 7 percent in April from
February 1998 levels, forcing refiners to use up stored fuel.
Brent crude oil futures will be at their highest level since
the Gulf War, almost a decade ago, if prices rise above their
Oct. 15, 1996, high of $25.06 a barrel.
Available global inventories of crude and other petroleum
products are at about 81 days of consumption now, their lowest
level for two years, according to the London-based Centre for
Global Energy Studies.
The CGES said this week that companies' stores of oil in the
Organization for Economic Cooperation and Development countries
will probably drop below their minimum operating requirement of
50 days during the first quarter.
An extension of the OPEC cuts beyond their expiry at the end
of March -- as some oil ministers suggest -- could lead to
supplies dropping to an all-time low of 45 days by the fourth
quarter, pushing the price of oil to $35 a barrel, CGES said.
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