Oil tops $83 despite bearish inventory data

Oil tops $83 despite bearish inventory data

Graphics shows the price of light, sweet crude oil for February delivery rose 1.41 U.S. dollars to settle at 83.18 dollars a barrel on the New York Mercantile Exchange on Jan. 6, 2010.

NEW YORK, Jan. 6 -- Oil refreshed its 14-month high with a settling price above 83 U.S. dollars on Wednesday as more risk-prone investors shrugged off a surprisingly bearish inventory report.

Crude futures rallied for the tenth straight session on Wednesday. Light, sweet crude for February delivery rose 1.41 dollars, or 1.7 percent, to settle at 83.18 dollars a barrel on the New York Mercantile Exchange. In London, February Brent crude contract gained 1.3 dollars, or 1.6 percent, to settle at 81.89 dollars a barrel. Both have refreshed the highest closing price since early October 2008.

Crude dipped below 81 dollars in morning trading after the U.S. weekly inventory report turned out to surprise the market.

The U.S. Energy Department Energy Information Administration said that during the week ending on Jan. 1, crude stockpiles rose 1.3 million barrels, while analysts had made an average forecast of a 300,000-barrel drop. Gasoline supplies increased 3.7 million barrels, against the forecast for a 300,000-barrel increase.

What is more surprising is the change in distillate stocks, which include heating oil and diesel. A drop of 200,000 barrels came far lower than the anticipated decline of 1.8 million barrels.

Another weekly draw in fuel supplies was widely expected, as the cold snap continued in North America. Crude stocks had been in decline for four consecutive weeks and distillate fuel supplies had dropped for three weeks prior to this week.

Oil refreshed its 14-month high with a settling price above 83 U.S. dollars, Jan. 7, 2010.

Fuel consumption fell 1.6 percent to 18.8 million barrels a day last week, the report showed. It also showed that inventories at Cushing, Okla., the physical delivery point of NYMEX futures, continued to rise and hit a record high of 35.7 million barrels last week.

But investors returned to a buy mood as a weakening dollar prompted appetite for risk taking.

"Today's EIA release posted bearish surprises relative to consensus expectations. If oil prices in the first instance corrected lower, in the end, the sway of the USD proved to be stronger than that of fundamentals," Harry Tchilinguirian, commodity derivatives senior oil analyst at BNP Paribas, wrote in a note to clients.

Minutes from the Federal Reserve's December meeting showed that a "few members" thought that the central bank's 1.25-trillion-dollar program to buy mortgages could need to grow, rather than be phased out on March 31.

The report suggested the U.S. economic recovery still faces difficulties and U.S. treasury prices fell as the minutes underscored some traders' concerns about inflation. And the dollar fell against the euro and sterling pound, pushing commodities prices to rise.

Economic data released on Wednesday also offered support for the oil rally. The Institute for Supply Management said its services index rose to 50.1 in December from 48.7 in November. A reading above 50 signals growth.

Analysts believed that the jobless report due on Friday is what the market focuses on and an upbeat reading could send oil even higher.

Oil refreshed its 14-month high with a settling price above 83 U.S. dollars, Jan. 7, 2010.
(Reuters)