Crude Oil Rises After Report Shows U.S. Oil Supplies Fell to 23-Year Low
By Vladimir Todres
London, Feb. 2 (Bloomberg) -- Crude oil rose 1.3 percent
after a report showed U.S. crude oil inventories plunged to levels
not seen since the wake of the Arab oil embargo more than two
decades ago.
U.S. crude oil supplies declined by a greater-than-expected
10.4 million barrels, or 3.6 percent, to 281.2 million barrels
last week, the American Petroleum Institute said last night.
Inventories fell to the lowest since August 1976 as the world's
top exporters restrained supplies and a cold snap spurred demand.
``The figures were extremely bullish,' said Jack Kellett, a
trader at Credit Lyonnais Rouse Ltd. ``We have seen oil rising
since the beginning of the week, and I don't believe the rise will
end here.'
Brent crude oil for March settlement rose as much as 34 cents
to $26.73 a barrel on the International Petroleum Exchange,
climbing for the fourth straight session. Prices have more than
doubled in the past year as the Organization of Petroleum
Exporting Countries slashed output to end a world glut.
The decline of crude oil inventories in the world's largest
energy-consuming country came as imports fell close to a 22-month
low, squeezed by OPEC, while refinery demand rose, fueled by
economic growth and cold weather in the past two weeks.
U.S. crude inventories are enough to feed the country's
refineries for 19.7 days, a decline from 22.5 days a year ago,
London-based Centre for Global Energy Studies said.
``It's a very low level,' CGES deputy director Leo Drollas
said.
Forecasts
The drop caught analysts off guard. Three had expected a
decline in a Bloomberg News survey, with the largest estimated
drop at 3 million barrels. The average high and low estimates
ranged from a drop of 300,000 barrels to a gain 600,000.
Prices also rose on the New York Mercantile Exchange, where
March crude oil was 28 cents higher at $28.50 a barrel. Last month
it neared $30.
U.S. inventories of distillate fuel, including heating oil
and diesel, fell 2.4 million barrels, less than expected but still
leaving stocks at their lowest level since June 1997.
Cold weather in the U.S. Midwest and Northeast, which has
helped boost oil prices recently, is expected to subside at the
end of this week, Massachusetts-based Weather Services Corp. said.
OPEC, along with four other nations, in March agreed to slash
the equivalent of 7 percent of global oil supplies from February
1998 levels. The group meets next month and may consider
increasing output, delegates have said.
``OPEC has said many times they'd look at the level of
stocks,' Drollas said. ``Things are very tight now. I hope this
news will add to evidence that current production levels aren't
enough' to meet world demand.
OPEC saw revenue soar about 40 percent to $160 billion last
year, though remains undecided whether to abandon output cuts when
they expire on March 31 or to extend them.
Inflation?
Western consumers are concerned prices near their highest
level since the 1991 Gulf War could spark inflation and stall
world economic growth. Both U.S. and Europe are considering
raising interest rates to stem inflation.
Nevertheless, price of crude oil, once adjusted for
inflation, remains almost 40 percent lower than it was in 1976,
when U.S. crude inventories were on the same level, and OPEC
argues the world's economy can afford today's prices -- or even
some rise.
Oil ``should trade at about $29 a barrel in order to keep its
real value of the past 10 years,' said Beshr Bakheet, managing
partner of Riyadh-based Bakheet Financial Advisors. ``Oil was an
undervalued commodity in the 1990s and now it seems to be
cyclically recovering its fair value, and this is far from calling
oil prices overvalued.'
Kuwait, OPEC's strongest advocate for extending cuts, said
today it wanted prices to remain above $25 a barrel for the
remainder of the year. The country's oil minister, Sheikh Saud
Nasser al Sabah, said he would like the average price for 2000 at
the same level as current prices, even though the U.S. considers
it too high.
The drop in U.S. oil inventories will influence OPEC's
debate next month, though the level of world inventories will hold
greater weight in its deliberations, a United Arab Emirates oil
ministry official said.
`They Need More'
``If you take just the U.S., then yes it's clear they need
more oil,' he said. ``But if you take all countries of the
Organization of Economic Cooperation and Development, then the
picture is different, and it's important to look at the big
picture.'
A group of U.S. politicians is pushing for the sale of oil
from the country's emergency reserves to combat rising prices.
Still, U.S. Energy Secretary Bill Richardson said yesterday
the U.S. had no intention of tapping the reserves. |
