"Oil Near Nine-year Highs on Stocks Drop, Shares Advance"
Tuesday December 28, 6:08 pm Eastern Time
By Haitham Haddadin
NEW YORK, Dec 28 (Reuters) - Energy shares posted modest gains on Tuesday amid support from crude oil prices rallying close to nine-year highs, mainly on expectations of bullish draws in weekly petroleum stockpiles in the United States.
February delivery light sweet U.S. crude finished the session 49 cents up at $26.82 a barrel, a hair away from the intra-day $26.85 high on the New York Mercantile Exchange.
Traders said the market drew fuel from forecasts that a widely-watched report from the American Petroleum Institute (API) would show bullish draws in U.S. crude stocks last week.
The data, issued after the NYMEX close and covering the December 24 week, was right on the mark -- citing a 3.2 million barrels drop against a forecast average draw of 3.0 million.
This meant the year-on-year decline in crude stocks in the United States, the world's largest energy consumer, has widened to a hefty 45 million barrels.
In response, oil futures piled on an additional 20 cents to $27.02 in the aftermarket, or within striking distance of the nine-year high of $27.15 reached on November 22.
''Coming on the heels of last week's not-so-bullish API numbers, I would expect at least moderate if not bullish draws on crude,'' said Gary Russell of Frost Securities, referring to the 199,000-barrel drop cited for the December 17 week.
The stocks draws are widely expected because of Year 2000 concerns and annual end-of-year movements of oil and products.
Surprisingly, the APIs cited a deeper-than-expected fall in heating oil stocks of 3.9 million barrels against a forecast 1.4, given the warmer-than-usual temperatures across the United States last week, which traders had expected to dull demand.
Gasoline inventories were seen falling by one million barrels but the APIs showed a draw of 411,000 barrels, which pressured unleaded futures in the afermarket a little.
Oil's $1 a barrel rise since Monday morning followed comments from Iran that it expects global oil supply cuts to be maintained by members of the Organization of Petroleum Exporting Countries (OPEC) beyond their March 2000 expiry.
Crude also found support from reports that Iraqi Basrah Light crude output has been halved for an indefinite time.
''They seem to be having problems to get production back up to full capacity having shut it off in protest at U.N. policy. That's definitely helping crude,'' said Frost's Russell.
But overall, volatile low-volume trade was eyed amid the holidays. Trade was absent Monday and Tuesday on London's International Petroleum Exchange, closed for the holidays.
On the share markets, all energy sectoral indices closed firmer, with oil services firms leading the gains. The energy sector rally came in line with several leading stock market indices closing above or near all time highs.
The Philadelphia Oil Services Index (^OSX - news) rose 1.19 percent to 83.28 points, while the S&P International Oil Index (^SPOILI - news) tracking the oil majors rose 0.66 percent to 956.72.
S&P Oil and Gas Index (^SPOILP - news) gained 0.14 percent to 54.54 and S&P Refining Index (^SPENRM - news) rose 0.40 cent to 95.47.
''The stock market have been rallying on technology mainly and people are looking for underperforming sectors. Oil stocks are an example of that,'' said Fadel Gheit of Fahnestock & Co.
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