NEW YORK Dec 19, 2007 (Dow Jones Newswires)
Crude oil futures gained for the first time in a week Wednesday after a U.S. government agency reported a pronounced drop in the nation's oil stockpiles.
But buying was muted by what traders saw as the chief reason behind the drawdown: tankers held up by fog, not a serious supply pinch.
Light, sweet crude for February delivery climbed $1.16, or 1.3%, to settle at $91.24 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled up $1.36 at $91.48 a barrel.
The market focused on Wednesday's weekly data release from the U.S. Energy Information Administration, the Department of Energy's statistics and analysis unit. The agency reported U.S. crude stockpiles fell by 7.6 million barrels last week to 296.9 million barrels - the lowest level since February 2005.
The average estimate among analysts surveyed by Dow Jones Newswires was for a 1.5 million-barrel crude draw.
Analysts said most of that drop was explained by a slackening pace of crude imports, which fell by 952,000 barrels a day last week as fog in the Houston Ship Channel held up tankers trying to dock at Gulf Coast refineries. Even as U.S. crude stocks shrank for the fifth week in a row, the decline will likely be short-lived, observers said.
"Today we rallied, but I think the market understands that the stock draw was more a function of dislocation due to lower imports than a real supply problem," said Andy Lebow, a senior vice president at MF Global in New York.
Also supporting crude prices was an unexpectedly large 2.1 million-barrel decline in distillate stocks, which include heating oil and diesel, to below-average levels for this time of year. Distillate consumption is also up versus a year ago, the EIA reported.
Snowstorms last week in the U.S. Northeast, the world's largest heating oil market, may have led consumers to top off their tanks in anticipation of the weather, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Front-month January heating oil rallied 4.25 cents, or 1.7%, to settle at $2.5979 a gallon.
"Heating oil is definitely leading the party up," Flynn said.
The outlook for heating oil is less certain, as the National Weather Service is forecasting above-normal Northeast temperatures over the next two weeks. The weather service is scheduled to release its updated long-range forecast Thursday.
While overall crude stocks fell, they increased by 100,000 barrels at Cushing, Okla., the delivery point for Nymex oil futures. The sixth weekly increase in a row served to temper buying sentiment on a day marked by low pre-holiday volumes, traders said.
"Cushing indicates to me there is plenty of domestic spot market crude available," said Jim Murphy, assistant vice president at R.J. O'Brien in Chicago. "That could put pressure on the market."
January reformulated gasoline blendstock, or RBOB, increased 2.76 cents, or 1.2%, to settle at $2.3319 a gallon.
Copyright (c) 2007 Dow Jones & Company, Inc.
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