Oil Tops $94 on US Crude Inventory Drop
Energy futures rose sharply after the government reported unexpected declines in supplies of crude and heating oil last week and the Federal Reserve announced a plan to help banks weather the credit crisis.
Crude supplies fell 700,000 barrels during the week ended Dec. 7, according to a weekly inventory report from the Energy Department's Energy Information Administration. Analysts had expected a 100,000 barrel increase.
And supplies of distillates, which include heating oil and diesel fuel, fell 800,000 barrels; analysts had expected inventories to rise by 300,000 barrels.
"Traders are concerned about that drop in distillate supplies," said Phil Flynn, an analyst at Alaron Trading, in Chicago.
Earlier, the Fed said it was working with other central banks to try to counter the credit crisis. That alleviated some of investors' disappointment that the Fed on Tuesday cut interest rates by just a quarter percentage point. Many investors had hoped for a larger half-point cut.
"Anything the Fed is doing to help out is going to support oil prices," said Brad Samples, commodities analyst at Summit Energy Services Inc. in Louisville, Ky.
Light, sweet crude for January delivery rose $4.37 to settle at $94.39 a barrel on the New York Mercantile Exchange, and January heating oil futures jumped 12.02 cents to settle at $2.6432 a gallon. It was crude's highest close since Nov. 27.
London Brent crude followed the movehigher .
Oil inventories had fallen for several straight weeks, which is normal for this time of year, but remain high by historical standards, the EIA said. Analysts said the report also contained elements that could undercut prices, including a 1.4 million barrel increase in oil supplies at the closely watched Nymex delivery terminal in Cushing, Okla.
But the market appeared to be more focused on the overall crude and heating oil numbers. Some analysts were perplexed by the focus on heating oil, noting that supplies often fall this time of year.
"We still look to be pretty well covered," said Samples, of heating oil supply levels.
At the pump, meanwhile, gas prices retreated further below $3 a gallon overnight, falling 0.5 cent to a national average of $2.99 a gallon, according to AAA and the Oil Price Information Service.
Other Nymex futures rose Wednesday. January gasoline jumped 12.14 cents to settle at $2.4128 a gallon. The EIA said gasoline supplies rose last week by 1.6 million barrels. Analysts surveyed by Dow Jones Newswires, on average, had expected a 1.2 million barrel increase.
Reports of a fire at a 350,000 barrel-a-day ExxonMobil refinery in Texas helped boost gasoline and heating oil prices, analysts said.
The EIA also reported that refinery activity fell 0.6 of a percentage point last week to 88.8 percent of capacity. Analysts had expected an increase of 0.1 percentage point to 89.5 percent of capacity.
Crude imports rose last week by an average of 689,000 barrels a day to 10.1 barrels a day. But gasoline imports fell last week by 184,000 barrels a day to an average of 985,000 barrels a day.
Gasoline demand rose by 82,000 barrels last week and was up by 0.4 percent over the past four weeks compared to the same period last year, the EIA said.