Crude Near $64 As Inventories Fall
Oil prices broke above $64 a barrel before pulling back. A drop in crude inventories added to a perception that high fuel stock levels reached in the third quarter have reversed.
Delays to U.S. oil imports due to dense fog along the Gulf of Mexico coast forced refiners to draw on inventories last week.
U.S. crude stocks fell 6.3 million barrels last week, according to government data. The fall was much sharper than the 1.7 million barrels analysts polled by Reuters expected.
The fog disruptions exacerbated an overall tightening inventory picture, analysts said.
U.S. commercial crude and refined product stocks combined were 400,000 barrels lower than the same time a year ago, a sharp fall from a huge 76 million barrels year-on-year surplus at the end of September.
Crude stocks were still nearly two percent higher than a year ago. But both gasoline and distillate inventories were lower than last year, despite a small weekly increase in Wednesday's government data.
"The tightening over the past two months hasn't really been priced fully in yet," said Paul Horsnell at Barclays Capital.
"Products markets looked horribly slack two months ago, but inventories have been falling by a million barrels per day in the United States."
INVENTORIES STILL COMFORTABLE
Other industrialized countries have also seen stocks fall. OECD stocks fell by 40 million dollars in October alone, the International Energy Agency said last week.
"Inventories are still comfortable," Mike Wittner at investment bank Calyon said. "But there is no question at all that we have had a quite serious drawdown in stocks. We're back to square one in terms of where we were a year ago."
The import delays on the U.S. Gulf Coast come just as OPEC production cuts start to affect shipments to the United States.
OPEC agreed to cut crude production by 1.2 million barrels per day (bpd) from November and a further 500,000 bpd from February.
A Reuters survey shows OPEC only met around two-thirds of its initial cutbacks, made to stem a price slide from over $78 in July, but analysts say inventories have still started to decline.
"Refinery runs were down so extra crude needed to be taken off the market," Wittner said. "That underscores OPEC's re-emerging role in balancing the crude market."
In the world's third largest oil consumer Japan, industry data on Wednesday showed crude and kerosene heating stocks both fell.
Tempering gains, mild weather was expected to last in most of the United States until at least early January, continuing a warm spell that has cut into heating demand, forecasters said this week.