Oil Gains a Second Day as Drop in U.S. Stockpiles Signals Demand

Oil rose for a second day in New York after an industry report showed stockpiles shrank in the U.S., the world’s biggest crude consumer.

West Texas Intermediate futures climbed as much as 0.6 percent yesterday from the highest close in a week. Crude inventories fell by 4.5 million barrels in the seven days ended Feb. 3, the first drop in three weeks, the American Petroleum Institute said after the day’s settlement. An Energy Department report today may show supplies rose 2.5 million barrels, according to a Bloomberg News survey of analysts.

“The API data provided momentum for the price gains,” said Ric Spooner, a chief analyst at CMC Markets in Sydney. “Front-month prices for West Texas are in a trend-channel pattern, with the range broadly between about $95.50 on the downside and $100.50 on the upside.”

Oil for March delivery advanced 56 cents to $98.97 a barrel in electronic trading on the New York Mercantile Exchange and traded at $98.90 at 12:18 p.m. in Singapore. The contract yesterday increased $1.50, or 1.6 percent, to $98.41, the highest settlement since Jan. 31. Prices are 14 percent higher than a year ago.

Brent oil for March settlement was at $115.98 a barrel, down 25 cents on the ICE Futures Europe exchange. The benchmark contract’s premium to New York-traded West Texas Intermediate was at $16.96, narrowing for a second day. The gap was at $19.02 on Feb. 6, the widest in three months.

Price Outlook

WTI will average $100.40 a barrel this year, according to a projection from the U.S. Energy Department. The forecast is 15 cents higher than the January estimate, it said yesterday in its monthly Short-Term Energy Outlook.

U.S. gasoline stockpiles rose 4.4 million barrels last week, figures from the American Petroleum Institute show. They are forecast to gain 875,000 barrels in the government report, according to the median of 10 analyst estimates in the Bloomberg News survey. Inventories of distillates, a category that includes diesel and heating oil, climbed 386,000 barrels compared with a projection for an 875,000 barrel decline.

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.

Bollinger Band

Oil in New York has technical resistance along the middle Bollinger Band, about $99.71 a barrel today, data compiled by Bloomberg shows. Futures slipped below the lower band yesterday before settling higher, signaling a rebound from chart support. Investors tend to sell contracts as prices approach resistance.

Goldman Sachs Group Inc. recommended selling contracts of West Texas Intermediate crude for delivery in May and buying those for June, as rising inventories at the U.S. storage hub in Cushing, Oklahoma, will put pressure on short-term prices.

Crude inventories at Cushing, which typically drive the difference between monthly contracts, have increased by 2.8 percent this year to 30.1 million barrels, according to data from the Energy Department.

Source.