Crude Oil Nears 3-Year High as Supplies Drop More Than Expected
London, Nov. 17 (Bloomberg) -- Crude oil rose near a three-
year high after U.S. inventories dropped more than expected,
leaving supplies 10 percent less than in April, when exporters
slashed output to end a glut.
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 after the
Organization of Petroleum Exporting Countries reduced production,
forcing refiners to drain storage tanks.
''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 supplies last week fell by 2.49 million or 0.8
percent to 309 million barrels, the American Petroleum Institute
said yesterday. Analysts expected a drop on average of 1.1
million to 1.9 million barrels, a Bloomberg survey said.
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.
Oil prices also rose in the U.S., with crude oil for
December delivery on the New York Mercantile Exchange up 39 cents
at $26.09 in electronic trading. A rise above $26.80 in New York
will leave prices at their highest level since the 1990-91 Gulf
War, when crude touched $41.15 a barrel.
Inventories are declining just as demand is set to rise with
the onset of the Northern Hemisphere winter, when use of heating
fuels increases.
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.
Still, some analysts expect the group may boost production
next year to prevent prices from rising too much and encouraging
idle oil fields to restart output.
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