Better Fill up today

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Crude Oil Declines as World Bank Predicts a Deeper Recession
By Grant Smith and Christian Schmollinger

June 22 (Bloomberg) -- Crude oil fell for a second day after the World Bank said the global recession will be deeper than expected, stoking concerns that fuel demand will remain depressed.

Oil was also hurt by the strengthening dollar, dulling the need for investors to buy commodities as an inflation hedge. The World Bank projects the global economy will contract 2.9 percent this year, more than its previously forecast decline of 1.7 percent. Nigeria's main rebel group said yesterday it attacked Royal Dutch Shell Plc's Ofirma offshore oil fields.

"It seems like the correction is under way," said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. "Demand is not really recovering, and despite all the geopolitical noise, we still have over-production."

Crude oil for July delivery fell as much as $1.66, or 2.4 percent, to $67.89 a barrel in electronic trading on the New York Mercantile Exchange. It was at $68.47 a barrel at 11:37 a.m. London time. The contract expires today. Oil for August delivery, the more-actively traded contract, was at $68.75 a barrel, down $1.27.

The Movement for the Emancipation of the Niger Delta said it attacked the "jacket A" structure of Shell's offshore fields at about 4 a.m. local time today, according to an e- mailed statement from the group, also known as MEND.

'Bearish Sign'

Last week's increase in U.S. gasoline inventories to 205 million barrels was the biggest jump since January. Motor fuel demand averaged 9.26 million barrels a day for the four weeks ended June 12, the Energy Department said. That's down 0.3 percent from the previous year.

"If we should stay below $70 for the August contract, that should be a bearish sign," said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo. "Gasoline demand has improved somewhat due to seasonal factors, but I'm not sure how realistic that will be."

Total daily fuel demand in the four weeks ended June 12 was down 6 percent from a year earlier, the department said.

Brent crude for August settlement was at $68.24 a barrel, down 92 cents, at 12:35 p.m. London time on London's ICE Futures Europe exchange.

Hedge-fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended June 16, according to U.S. Commodity Futures Trading Commission data.

Speculative Positions

Speculative long positions, or bets prices will rise, outnumbered short positions by 26,430 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 21,453 contracts, or 45 percent, from a week earlier.

Unrest continued this weekend in Tehran over the results of elections in Iran, the Organization of Petroleum Exporting Countries' second-largest producer.

Still, it is unlikely that either side in the political dispute would disrupt the country's exports of 2.2 million barrels a day, Michael Wittner, head of oil research at Societe Generale, said in a June 19 note.

"Even if there is violent regime change in Iran, we would not at all jump to the conclusion that crude production and exports would be shut down," the report said. "Any new government would know that the Iranian economy is highly dependent on revenue from crude exports."



Last Updated: June 22, 2009 06:39 EDT

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Oil Drops as Equities Decline on Concern About Deeper Recession


By Alexander Kwiatkowski and Nidaa Bakhsh

June 23 (Bloomberg) -- Crude oil fell for a third day in New York, following equity markets lower amid concerns that the global economic recovery will be slower than some forecasts.

Oil traded below $67 a barrel as equities in developing nations fell, dragging the MSCI Emerging Markets Index down 10 percent from its 2009 peak. Oil is down more than $6 from this year's high of $73.23, approaching the 10 percent decline that analysts including Stephen Schork consider to be a correction.

"Exuberance in the crude oil market is waning," Schork, president of the Schork Group in Villanova, Pennsylvania, told clients today in a note. "Telltales appear that a correction in crude oil is imminent. As far as today goes, we have changed our daily technical bias to bearish."

Crude oil for August delivery declined as much as $1.13, or 1.7 percent, to $66.37 a barrel on the New York Mercantile Exchange. It traded at $67.06 at 11:03 a.m. in London. The July contract expired yesterday at $66.93.

The MSCI Emerging Markets Index of 22 countries lost 2 percent, the most in four days, as of 10:34 a.m. in London. U.S. and European stocks fell yesterday after the World Bank projected the global economy will contract 2.9 percent this year, more than an earlier projection of 1.7 percent.

"What's behind the movement is a change in sentiment," Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone. "Before, we were expecting a real demand recovery. Now, we're pricing in a slowdown of the slowdown."

Falling Demand

Total U.S. daily fuel demand in the four weeks ended June 12 was down 6 percent from a year earlier, the Energy Department said last week. Gasoline inventories rose 3.39 million barrels to 205 million in the week ended June 12, the biggest increase since January, the department said.

Gasoline supplies rose 1 million barrels last week, according to the median of 10 estimates by analysts surveyed by Bloomberg News. The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington.

Brent crude oil for August settlement dropped as much as $1.08, or 1.6 percent, to $65.90 a barrel on London's ICE Futures Europe exchange. It traded at $66.65 at 11:03 a.m. London time.

"Oil prices had run ahead of fundamentals. A pretty big disconnect had opened up," said Mike Wittner, head of oil market research at Societe Generale SA in London. "We are seeing some closure of that disconnect."

Iran Impact

Oil analysts said continuing civil unrest in Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, isn't helping oil prices.

Iran's Revolutionary Guards vowed to "put an end to the chaos" of street protests against the re-election of President Mahmoud Ahmadinejad. State-run Press TV yesterday cited the country's OPEC governor, Mohammad Ali Khatibi, as telling the Iran Daily newspaper there's been no impact on crude exports.

"The bullish trend in crude oil has failed to perpetuate despite the introduction of bullish headlines from Iran," said Schork. "Crude oil's rapid rise has stalled. A market that cannot move higher on news like that appears ripe for a further selloff."

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Oil Falls Below $69 on Japan Exports Drop, U.S. Gasoline Supply



By Rachel Graham and Ben Sharples

June 24 (Bloomberg) -- Crude oil fell below $69 in New York as Japanese exports dropped and an industry report showed an increase in U.S. gasoline inventories, raising concern the global recession will sap fuel demand.

The amount of goods sold from Japan, the world's third- largest oil consumer, accelerated a decline in May, casting doubt on the economy's growth prospects. Gasoline supplies increased 3.7 million barrels last week, the industry-funded American Petroleum Institute said yesterday.

"It's still a dark picture," Gerrit Zambo, an oil trader at BayernLB, said by phone from Munich. "The economic numbers of the past weeks don't back up the recent rise in the oil price."

Crude oil for August delivery fell as much as $1.18, or 1.7 percent, to $68.06 a barrel in electronic trading on the New York Mercantile Exchange. It was at $68.65 a barrel at 11:10 a.m. London time. Prices rose to a seven-month high of $73.23 on June 11.

Brent crude for August settlement declined as much as $1.22, or 1.8 percent, to $67.58 a barrel on London's ICE Futures Europe exchange. It last traded at $68.45 a barrel.

Japanese exports fell 40.9 percent from a year earlier, more than the 39.1 percent drop in April, the Finance Ministry said today in Tokyo.

"Unless we start to see sequential GDP growth, it's going to be very hard to sustain these high prices," Francisco Blanch, head of global commodity research at Banc of America Securities-Merrill Lynch, said in a Bloomberg Television interview. "We've run out way too far."

'Mid-Cycle Price'

"Seventy-dollars a barrel is a mid-cycle price," he said. "It's not a price we should have at a time when the recovery isn't yet being seen through."

The U.S. Energy Department is expected to report that supplies of crude oil dropped 950,000 barrels, according to the median of 14 analyst responses in the Bloomberg News survey. Stockpiles fell 3.87 million barrels in the week ended June 12, the department said last week.

Inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, increased, according to the respondents. The department is scheduled to release its weekly report today at 10:30 a.m. in Washington.

"A rise in gasoline inventories and a lower than expected drop in crude supplies will help suppress the price of crude oil," Mike Sander, an investment adviser with Sander Capital in Seattle, said in an e-mail.

Gasoline Stockpiles

Gasoline stockpiles increased to 211.4 million barrels in the week ended June 19, while crude supplies fell 72,000 barrels to 356.6 million, according to the API report. Distillate fuel stockpiles rose 2.3 million barrels to 153.9 million, the reports said.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the energy Department for its weekly survey.

Gasoline for July delivery dropped as much as 4.32 cents, or 2.3 percent, to $1.85 a gallon.

OPEC won't reduce crude oil production when it meets in September and will ask for more compliance with existing quotas, Kuwaiti Oil Minister Sheikh Ahmed al-Abdullah al-Sabah said yesterday.

The group plans to meet on Sept. 9 in Vienna. The Organization of Petroleum Exporting Countries agreed at three meetings last year that the 11 members with production targets would cut output by 4.2 million barrels a day.

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Iraq Opens Oilfields as Exxon, Shell Seek $16 Billion Foothold



By Anthony DiPaola

June 25 (Bloomberg) -- Iraq is set to welcome back foreign oil companies into the war-torn nation to develop the world's third-largest crude reserves three decades after expelling them.

Eight of the world's top 10 non-state oil producers, including Exxon Mobil Corp. and Royal Dutch Shell Plc, are vying for the right to help Iraq develop six oilfields and two natural-gas deposits. More than 30 companies in total are bidding for $16 billion worth of technical service contracts for producing fields that will be awarded in Baghdad on June 29-30.

"Iraq is the big prize in the region," said Raja Kiwan, a Dubai-based analyst at consultants PFC Energy. "It is one of the only remaining areas that provide the level of upside for companies who want to access reserves."

The OPEC producer is struggling to increase output and revenue from crude sales after six years of conflict and prior sanctions destroyed the country's economy and infrastructure. The government, also running a second bidding round for 11 oil and gas fields, aims to boost production to about 6 million barrels a day by 2015, from 2.4 million barrels in May. Saudi Arabia, the world's biggest oil exporter, produces 8 million barrels a day.

Companies investing in Iraq are looking to take a stake in the long-term potential that the country's 115 billion barrels of reserves hold after gaining a foothold through the service contracts for operational fields. Iraq may offer foreign companies direct stakes in deposits and allow them to sign production-sharing agreements for future fields, according to Oil Minister Hussain al-Shahristani.

Iraqi Benefits, Security

Iraq will earn 100 times more than the foreign companies it hires to develop the deposits, the minister told parliament in Baghdad on June 23. The deposits being offered in the first licensing round may yield $1.7 trillion in profit for the country, based on an oil price of $50 a barrel, while oil companies seeking service contracts will gain $16 billion over the 20-year life of the contracts, he said.

Winning the oil contracts may be easier for foreign companies than contending with security threats in Iraq and objections to the bid-round by some lawmakers. Irving, Texas- based Exxon is still deciding whether to bid, Chief Executive Officer Rex Tillerson said June 16, while The Hague-based Shell was in talks with Chinese companies on bidding jointly for the contracts, CEO Jeroen van der Veer said April 14.

U.S. troops are due to pull out of Iraq's cities by June 30 and the entire country by the end of 2011, and Iraqi officials have said the nation's security forces will be able to cope alone. Iraq and Britain signed a draft agreement on June 3 for some U.K. troops to remain in the country to help Iraqi naval forces protect oil platforms.

Government Criticized

Prime Minister Nuri al-Maliki's government has been criticized by lawmakers for its failure to raise oil production faster and they want the licensing round scrapped because of concerns the deals won't benefit Iraq.

Al-Shahristani defended government policy in parliament this week, saying foreign investment will raise production and profit while overseas oil companies will get a fee for developing deposits without taking stakes in any fields.

Iraq's reserves are so large and so little developed that foreign companies are willing to take the risk, said Tariq Shafiq, an adviser with London-based Petrolog & Associates and a former Iraqi Oil Ministry official who helped write the nation's draft oil law. The country's parliament has not approved the oil law due to disagreements between the government and lawmakers.

Vast Reserves

Oil companies are seeking access to new reserves as production declines at aging fields in the North Sea and resources like those in Saudi Arabia and Iran are restricted for foreign firms. The new Iraqi contracts may also increase demand for drilling and engineering equipment as companies compete for equipment to develop fields in Saudi Arabia, Kuwait and other Gulf countries.

"There's a huge amount of pressure on all international oil companies looking at Iraq to make sure they have the first foot in," said PFC Energy's Kiwan.

Saudi Arabia is the world's largest holder of reserves with 264 billion barrels, followed by Iran with almost 138 billion barrels. Iraq may be a more attractive long-term development for international investors since it has produced only about 8 percent of its oil compared with more than 20 percent by Saudi Arabia and Iran, Shafiq said.

To supplement income from the contracts, the government is also asking winning bidders to provide a total of $2.6 billion in loans, which will later be repaid. Iraq needs cash to build infrastructure, and the government plans to sell about $5 billion in bonds to help pay for power and water projects. This month it proposed a $70 billion spending plan for housing, agriculture and transport.

ConocoPhillips, Lukoil, Total

ConocoPhillips, based in Houston, was in talks about preparing joint bids with Russia's OAO Lukoil and other potential partners, Chief Executive Jim Mulva said in a June 5 interview in St. Petersburg. Total SA, France's largest energy company, will bid for the contracts, the Iraqi prime minister's office said in a June 10 statement. StatoilHydro ASA, Norway's biggest oil and natural-gas producer, was also preparing a bid, Peter Mellbye, vice president for international exploration and production, said June 16. In 1972, Iraq nationalized concessions owned by companies now known as BP Plc, Shell and Exxon.


Last Updated: June 24, 2009 19:01 EDT

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I have been to the Bonny Terminal and it would be impossible to protect the lines coming in. It is surrounded by Jungle.



Oil Rises Above $69 After Attacks on Shell Pipeline in Nigeria


By Nidaa Bakhsh

June 25 (Bloomberg) -- Crude oil rose above $69 after militants attacked a Royal Dutch Shell Plc pipeline supplying an export terminal in Nigeria, Africa's largest producer.

The Movement for the Emancipation of the Niger Delta, the main militant group in Nigeria's southern oil region, said it attacked a "major" crude oil pipeline supplying Shell's Bonny export terminal. The militant group has stepped up a sabotage campaign since a military offensive began last month in the Niger River delta oil producing region.

The oil market is "starting to price in the Nigerian disruption," Olivier Jakob, managing director at Petromatrix GmbH, said by phone today from Zug, Switzerland. "It's definitely starting to add up."

Crude oil for August delivery advanced rose as much as 62 cents, or 0.9 percent, to $69.29 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $69.15 at 10:22 a.m. London time. Prices are up 55 percent this year.

Nigeria may currently be producing as little as 1.3 to 1.4 million barrels a day of crude, compared to 1.8 million barrels a day in the first quarter, Jakob said.

Fighters from the Nigerian group, known as MEND, damaged the Bille-Krakrama pipeline overnight, cutting supplies from Shell's Cawthorne 1, 2 and 3 oil-pumping stations, MEND spokesman Jomo Gbomo said in an e-mail. A Shell spokeswoman confirmed an attack on a manifold on the pipeline and couldn't say whether any production was halted by the incident.

U.S. total oil inventories fell for a third week, down 3.87 million barrels to 353.9 million barrels last week, the lowest since March, the Energy Department said yesterday.

Brent Crude

Brent crude for August settlement was up 55 cents to $68.88 a barrel on London's ICE Futures Europe exchange at 10:22 a.m. London time.

U.S. supplies of distillate fuel, a category that includes heating oil and diesel, rose 2.08 million barrels to 152.1 million, the highest since January 1999. A 850,000-barrel gain was forecast, according to the median of 15 analysts surveyed.

Gasoline inventories rose 3.87 million barrels to 208.9 million last week, the Department of Energy said. Stockpiles were forecast to increase by 1 million barrels, according to a Bloomberg News survey. Refineries operated at the highest rates this year and fuel demand fell 5.5 percent, the biggest drop since January.

Refineries operated at 87.1 percent of capacity in the week ended June 19, up 1.2 percentage points from the previous week and the highest since the week ended Dec. 5, the Energy Department report showed.



Last Updated: June 25, 2009 05:24 EDT

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This could cause higher prices as the US gets a lot of its crude from Nigeria. The Nigerian Crudes are of good quality and are high gasoline/diesel yield crudes. Many of our refineries cannot run the lower quality Persian Gulf area crudes due to the gravity and high H2s content.



Oil Rises a Second Day on Nigeria Field Attack, Weaker Dollar


By Nidaa Bakhsh

June 26 (Bloomberg) -- Crude oil rose for a second day as Nigerian militants continued attacks on oil installations in Africa's largest crude producer and the dollar weakened.

Militants in Nigeria said today they attacked the second well head at Royal Dutch Shell Plc's Afremo offshore oil field. The Movement for the Emancipation of the Niger Delta said yesterday they attacked a Shell pipeline supplying an export terminal.

"For oil, it's largely the dollar and persistent attacks in Nigeria," Andrey Kryuchenkov, a VTB Capital commodity analyst in London, said by phone. "I don't think it'll go higher from here. It'll sit here below $72."

Crude oil for August delivery rose as much as $1.06, or 1.5 percent, to $71.29 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $70.68 a barrel at 12:17 a.m. London time.

Shell's offshore facility was blown up at about 11 p.m. yesterday, hours after an offer of an amnesty by President Umaru Yar'Adua. The attack was in response to "a punitive" raid by the military on the Agbeti community in the Delta state, the main oil-producing region.

The platform had been shut since Feb. 28 following an attack on Shell's Trans Escravos Pipeline, Precious Okolobo, Shell's spokesman in Nigeria, said by phone. Military spokesman Colonel Rabe Abubakar said troops didn't carry out any raids yesterday.

Dollar Weakness

"With a lot of oil removed from the market, weakness in the dollar has a greater influence in determining the short-term trend," said Harry Tchilinguirian, a senior oil analyst at BNP Paribas SA, by phone.

Brent crude oil for August settlement rose as much as $1.03, or 1.5 percent, to $70.81 a barrel on London's ICE Futures Europe exchange. It traded at $70.19 a barrel at 12:17 a.m. in London.

A falling dollar makes commodities such as oil and gold an attractive alternative investment. The dollar traded at $1.4099 versus the euro at 12:12 a.m. in London from $1.3988 yesterday.

Oil prices have been supported and supply curbed since the re-emergence of militant activity in the Niger River delta, Nigeria's main oil-producing region, in December 2005. MEND has stepped up a sabotage campaign in the area since a military offensive began last month.

Fighters from the Nigerian group damaged the Bille-Krakrama pipeline, cutting supplies from Shell's Cawthorne 1, 2 and 3 oil-pumping stations, MEND spokesman Jomo Gbomo said in an e- mail yesterday. A Shell spokeswoman confirmed an attack on a manifold on the pipeline and couldn't say whether production was halted by the incident.

Nigeria produces so-called sweet, or low-sulfur, crude oil that is prized by refiners because it yields a large amount of gasoline and diesel fuel when processed.

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WE have been on the road for three days s, just got back in, so I am late in posting .

Oil Little Changed as IEA Cuts Forecast, Nigeria Rebels Attack


By Grant Smith and Yee Kai Pin

June 29 (Bloomberg) -- Crude oil traded little changed after Nigerian militants said they attacked a Royal Dutch Shell Plc oil platform, while the International Energy Agency downplayed concerns of a supply crunch.

The Movement for the Emancipation of the Niger Delta rebel group said they attacked Shell's Forcados offshore oil facility at 3:30 a.m. local time today. The IEA, an adviser to 28 oil- consuming nations, cut five-year forecasts for global crude demand because of the economic slump.

"Bullish participants are seizing on the latest attacks in Nigeria to take another run at $70," said Christopher Bellew, senior broker at Bache Commodities Ltd. "We may get to $70 a barrel but unless demand improves it will be very difficult to stay there."

Crude oil for August delivery traded for $69.20, 4 cents higher, in after-hours electronic trading on the New York Mercantile Exchange as of 9:48 a.m. London time. Oil is poised for a quarterly gain of 39 percent, the biggest in a decade.

The IEA cut its oil demand estimates for every year through 2013 by about 3 million barrels a day, it said in its Medium- Term Oil Market Report today. Consumption will average 86.76 million barrels a day in 2012, the first year demand will rise above 2008's level of 85.76 million barrels a day, according to the Paris-based agency.

"The deep economic recession that has spread worldwide in the past year has taken a severe toll on oil demand," the IEA said in the report, updating estimates made in December. "This marks a break after several years of strong oil demand growth."

Estuary Field Closed

Royal Dutch Shell Plc also closed Nigeria's Estuary oil field after attacks on production wells, spokesman Tony Okenodo said by phone from Lagos today. Nigeria, vying with Angola to be Africa's largest producer, has been losing about 20 percent of its production since 2006 because of militant violence.

New York oil futures have gained 55 percent this year, as the recent rise in world equity markets and a weaker dollar encouraged investors to buy the commodity as a hedge against inflation and to profit if demand recovered. Futures are headed for their strongest first-half finish since 1999, when prices rose 60.1 percent in six months.

Brent crude oil for August settlement traded for $69.01 a barrel, 9 cents higher, on London's ICE Futures Europe exchange.

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Oil Rises to Eight-Month High on Weaker Dollar, Nigeria Attacks



By Alexander Kwiatkowski

June 30 (Bloomberg) -- Crude oil rose to the highest in eight months, set for its biggest quarterly gain since 1990, as the U.S. dollar declined and militant attacks in Nigeria curbed supply from Africa's largest producer.

Oil jumped as much as 2.6 percent in New York, adding to yesterday's 3.4 percent gain, as investors sought commodities as a hedge against inflation. The dollar fell for a fourth day against the euro. Royal Dutch Shell Plc shut a field yesterday after an assault by Nigerian rebels.

"Nigeria is still driving prices and the weaker dollar is also contributing to higher oil," said Andy Sommer, an oil analyst at Elektrizitaets-Ges Laufenburg AG in Dietikon, Switzerland. "There is a natural link between the dollar currency and the oil price."

Crude oil for August delivery gained as much as $1.89 to $73.38 a barrel on the New York Mercantile Exchange, the highest since Oct. 21. It was at $72.65 a barrel at 11:19 a.m. in London.

Oil futures have gained 46 percent this quarter on optimism that the global economic recession is easing. That's the biggest gain since the third quarter of 1990, when they more doubled after Iraq's invasion of Kuwait.

China, the world's second-biggest energy consumer, raised domestic fuel prices today by as much as 11 percent to encourage refiners to produce more fuels amid higher crude costs.

Traders may have been forced to buy contracts to close off their positions for the quarter, pushing prices higher. About 1,667 contracts were traded in the five minutes around the time when crude prices reached an intraday high of $73.38 today. In comparison, 60 contracts changed hands at about the same time a day earlier.

'Technical Buying'

"There is some technical buying interest from people covering there short positions," said Sommer of Elektrizitaets- Ges Laufenburg.

Shell, Europe's biggest oil company, shut its Estuary oil field in Nigeria's southern delta region after a militant attack. The strike targeted two well clusters in the western Niger River delta, Tony Okonedo, a Shell spokesman, said by phone from Lagos yesterday. The Movement for the Emancipation of the Niger Delta, or MEND, said it attacked the oil field near Shell's Forcados oil export terminal and set it ablaze.

MEND, which says it's fighting on behalf of the region's poor, has stepped up sabotage campaign against Nigeria's oil industry since a military offensive against its positions in the delta began last month. The attacks have shut facilities operated by Shell, Chevron Corp. and Eni SpA, curbing production of the light, sweet variety of oil favored by U.S. refiners.

'Brushed Aside'

"After the financial crisis that we went through, too much focus has been put on the demand side of the equation, while the supply side has been brushed aside," said Olivier Jakob, managing director at Petromatrix GmbH. "It is however the supply side in Nigeria that is currently supporting the crude markets."

A U.S. government report released tomorrow may show crude oil inventories falling for the seventh time in eight weeks, as refineries ramp up operation rates in anticipation of higher fuel demand during the Independence Day holiday.

Supplies probably fell 1.6 million barrels in the week ended June 26, according to the median of nine estimates by analysts surveyed by Bloomberg News. The Energy Department is scheduled to release its weekly report at 10:30 a.m. in Washington.

Brent crude oil for August settlement rose as much as $2.51, or 3.5 percent, to $73.50 a barrel on London's ICE Futures Europe exchange and traded at $71.63 at 10:33 a.m. local time. Yesterday, it climbed $2.07, or 3 percent, to $70.99 a barrel, the biggest gain since June 4.



Last Updated: June 30, 2009 06:22 EDT

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Oil Rises Before Report Forecast to Show U.S. Supplies Shrank


By Grant Smith and Christian Schmollinger

July 1 (Bloomberg) -- Oil rose above $70 a barrel before the release of a report forecast to show that U.S. crude inventories declined for a fourth week, stoking hopes for a recovery in demand as the recession abates.

The Energy Department report today will show crude-oil stockpiles dropped 2 million barrels last week, according to a Bloomberg survey. Yesterday the industry-funded American Petroleum Institute said crude supplies fell by 6.8 million barrels. Oil was also helped as European equities rose.

"It was an extremely huge stock draw," said Hannes Loacker, a Raiffeisen Zentralbank Oesterreich analyst in Vienna. "If we get confirmation of that data in the Energy Department, that will help prices."

Oil for August delivery gained as much as $1.39, or 2 percent, to $71.28 a barrel on the New York Mercantile Exchange, and was at $71.14 at 11:15 a.m. London time. Oil dropped from an eight-month high yesterday after U.S. consumer confidence declined in June.

"A fall in crude inventories will cause the market to move higher," said Mike Sander, an investment adviser with Sander Capital in Seattle. Should the government report also show a decline, "it will reinforce crude to stay at or go above current levels," he said.

New York oil jumped 41 percent in the second quarter, the biggest since 1990. Prices have rallied as rebounding world equity markets and a weaker dollar encouraged investors to buy crude as an alternative investment.

The U.S. currency traded at $1.4068 versus the euro at 11:06 a.m. in London, 0.1 percent weaker.

Fuel Supply

The Energy Department report, due at 10:30 a.m. in Washington, will probably show that gasoline supplies climbed by 2 million barrels, according to the Bloomberg survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, likely increased 1.5 million barrels.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Oil-supply totals from the API and Energy Department moved in the same direction 76 percent of the time over the past four years, according to data compiled by Bloomberg.

Brent crude oil for August settlement rose as much as $1.39, or 2 percent, to $70.69 a barrel on London's ICE Futures Europe exchange. It was at $70.53 a barrel at 11:15 a.m. in London.

European stocks rose, extending the Dow Jones Stoxx 600 Index's best quarterly gain this decade. Marks & Spencer Group Plc reported its smallest quarterly sales decline in almost two years, and manufacturing in China rose a fourth straight month.

The Purchasing Managers' Index increased to a seasonally adjusted 53.2 in June from 53.1 in May, the Federation of Logistics and Purchasing said today in Beijing. A reading above 50 indicates an expansion. China is the largest crude oil user after the U.S.

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Oil to Rise After Averting Slide: Technical Analysis (Update1)



By Yee Kai Pin

July 1 (Bloomberg) -- Crude oil is set to extend gains amid this week's volatility and may reach the $76 a barrel level last traded in mid-October, said the head of Cameron Hanover Inc.

The market's ability today to stay close to the psychologically important $70-a-barrel mark is keeping prices from slipping into a technical downtrend channel on the daily continuation chart, said Peter Beutel, president of the New Canaan, Connecticut, trading advisory firm. Oil rose 41 percent between April and June, the biggest quarterly climb since 1990.

"The rally has given the bulls a new lease on life and it now gives them the chance to take a run at buy-stops above $73.23," Beutel said. "That level is acting like a magnet."

Oil yesterday spiked above $73.23 a barrel, which stood as the June high for more than two weeks, as the dollar declined and escalating militant attacks in Nigeria raised concern supplies may be disrupted.

Other technical readings also hint at upside momentum. The weekly Moving Average Convergence-Divergence oscillator continues to hold firm above its signal line, indicating support.

"Momentum is a two-edged sword," said Beutel. "It can show strength, or it can show overbought pressures."

Further resistance is marked by the upper Bollinger Band, a moving objective around $74.64 a barrel today, before $76.28. That's the 38.2 percent Fibonacci retracement of the rise to $147.27, the all-time high registered July 11 last year, from the December 19 low of $32.40. Oil last traded at $76.28 on October 15.

"If prices fail below the Fibonacci figure, after triggering buy-stops, it could be a sign of a possible top," he said. "If they sail up through that $76.28 figure, it would be bullish."

Front-month crude oil futures for August delivery on the New York Mercantile Exchange, up 56.7 percent in 2009, traded at $70.96 a barrel at 3:20 p.m. Singapore time.



Last Updated: July 1, 2009 03:25 EDT