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Decline in inventory larger than expected Original Source Link: (May no longer be active)
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Oil Rises a Second Day After U.S. Reports Fall in Inventories
Sept. 15 (Bloomberg) -- Crude oil rose a second day in New York after the U.S. Energy Department reported a larger-than- expected decline in U.S. inventories.
Crude-oil supplies fell 6.6 million barrels to 308.4 million last week, three-times the decline expected, after Hurricane Katrina cut output in the Gulf of Mexico. Daily imports fell 4.2 percent to 9.1 million barrels, a one-year low. Output in the Gulf was 56 percent below normal yesterday, barely changed from the day before, a government report showed.
``There's just been too much disruption to too many parts of the whole supply chain,'' said David Thurtell, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``There's a worry that it's going to take longer to get things back.''
Crude oil for October delivery rose as much as 32 cents, or 0.5 percent, to $65.41 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $65.34 at 8:37 a.m. in Sydney.
Yesterday, the contract rose $1.98, or 3.1 percent, to $65.09 a barrel, the highest closing price since Sept. 6. Gains accelerated in the last 45 minutes of trading after a U.S. Minerals Management Service report showed Gulf producers have restored less than 54,000 barrels of daily output this week.
Production ``hasn't materialized and that tells me that there's probably more damage than what everybody is talking about,'' said John Berger, managing partner at Contango Capital Partners in Houston, a venture capital firm focused on energy.
Katrina Impact
Katrina has halted a total of 20.5 million barrels of oil output and 99 billion cubic feet of gas production since the hurricane entered the Gulf on Aug. 26. About 30 percent of U.S. oil production comes from platforms in the Gulf.
Oil futures have declined 8 percent since touching a record $70.85 a barrel on Aug. 30. Prices today are 50 percent higher than a year ago.
``The shock of Katrina is still being felt,'' said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. ``Offshore production is still down by more than 50 percent and imports were down.''
Heating oil for October delivery surged 8.47 cents, or 4.6 percent, to $1.9249 a gallon yesterday. It was at $1.9375 in after-hours trading, 60 percent higher than a year ago.
Supplies of distillate fuel, which include heating oil and diesel, fell 1.1 million barrels to 133.3 million. Analysts surveyed by Bloomberg were split on the direction on distillate stockpiles. A decline of 150,000 barrels was expected, according the median of responses.
Fuels Demand
``The size of the distillate draw wasn't spectacular but is disconcerting given that we are approaching the heating season,'' said Marshall Steeves, an oil analyst at Refco Inc. in New York. ``Heating oil is ascendant right now, while interest in gasoline wanes.''
Gasoline supplies climbed 1.9 million barrels to 192 million, the first rise in 12 weeks, according to the report. A decline of 2.2 million barrels was expected. Consumption fell for a third week, the report showed. The period covered by the report included Labor Day, the end of the peak-demand driving season.
``Gasoline demand dried up over the Labor Day holiday,'' said Phil Flynn, vice president of risk management at Alaron Trading Corp. ``Americans were shocked by $3 gasoline and were glued to their television sets watching the devastation in New Orleans, cutting consumption. In the South there were tight supplies and shortages, which may have also played a part.''
Gasoline for October delivery rose 4.58 cents, or 2.4 percent, to $1.9374 a gallon. It was at $1.95 in after-hours trading. Futures are up 61 percent from a year ago.
Stockpiles Tapped
The draw from crude oil inventories was more than a million barrels larger than the highest forecast in a survey of 14 analysts by Bloomberg. The median forecast was for a 2 million barrel decline in the stockpile.
The Energy Department announced that the U.S. will sell 11 million barrels of oil from the Strategic Petroleum Reserve to five companies to compensate for supplies lost as a result of the hurricane. The oil will go to companies that bid successfully on the department's offer to sell as much as 30 million barrels from the reserve.
Prior to offering oil for sale from the reserve, the department loaned 12.6 million barrels to refineries whose supplies were disrupted by the storm.
``It's not very much,'' little,'' said Peter Beutel, an energy consultant and president of Cameron Hanover Inc. in New Canaan, Connecticut. ``The effect of the release was psychological more than anything else.''
Last Updated: September 14, 2005 18:43 EDT
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