Oil Rises, Snapping 2-Day Drop, on Concern Supplies Are Falling

Oil Rises, Snapping 2-Day Drop, on Concern Supplies Are Falling

By Angela Macdonald-Smith

Nov. 14 (Bloomberg) -- Crude oil rose in New York, snapping a two-day decline, on speculation U.S. stockpiles declined last week and on a report that inventories dropped in the world's most-developed economies.

U.S. crude supplies probably fell 825,000 barrels in the week ended Nov. 9, according to a Bloomberg News survey before this week's Energy Department report. Global stockpiles are 113.9 million barrels lower than a year ago and Japanese crude supplies are at their lowest in at least 20 years, the Paris- based International Energy Agency said.

``The forecast of lower U.S. stockpiles would provide support as they're slightly weaker than last year,'' said Gerard Burg, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. ``Looking more broadly at OECD stocks they've been cut back quite a bit. The market is tighter on an absolute level and if you factor in that consumption has increased that adds an extra dimension.''

Crude oil for December delivery rose as much as 49 cents, or 0.5 percent, to $91.66 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract was at $91.44 at 10:09 a.m. in Singapore.

Yesterday oil fell $3.45, or 3.7 percent, to settle at $91.17 a barrel, the lowest close since Oct. 30, after the IEA cut its forecast for global demand through 2008 as prices near $100 a barrel slow consumption. It was the biggest drop in three months. Oil also declined after options contracts betting on $100 crude oil this year expired worthless.

Futures climbed to $98.62 on Nov. 7, the highest price since trading began in 1983. Oil is 57 percent higher than a year ago.

U.S. Inventories

U.S. crude oil stockpiles dropped 10 million barrels in the three weeks ended Nov. 2, according to the Energy Department. Inventories probably fell further last week from 311.9 million barrels, according to the median of responses by 15 analysts before a weekly report due to be released in Washington tomorrow.

Industry stockpiles in the world's most-developed economies fell 29.5 million barrels in September to 2.6 billion barrels, the IEA, adviser to 26 oil-consuming nations, said in its monthly report yesterday.

``There's much less coverage than there was this time last year,'' National Australia's Burg said. ``In the U.S. if you get refinery outages over the next few weeks then that would obviously put significant pressure on the market.''

Oil consumption next year will average 300,000 barrels a day less than a previous estimate, while fourth-quarter use will be 500,000 barrels a day less, the IEA said.

Brent crude oil for December settlement yesterday fell $3.15, or 3.4 percent, to close at $88.83 a barrel on the London-based ICE Futures Europe exchange. It was the biggest single-day drop since Aug. 6. Futures reached $95.19 a barrel on Nov. 7, the highest since trading began in 1988.
$200 Oil

Oil prices will jump to $200 a barrel if the U.S. invades Iran, which would cut off supply, Venezuelan President Hugo Chavez said yesterday.

``If the U.S. happens to invade Iran, oil will not just reach $100, but $200 per barrel,'' Chavez said. ``Not one drop of oil will leave Iran'' in an invasion.

``The same would happen here,'' as the people of the country will halt exports, he said.

U.S. leaders including President George W. Bush and Vice President Dick Cheney have said that Iran's nuclear program represents a potential threat and have refused to rule out the use of force. Congress hasn't passed proposals restricting action against the country, the second-biggest oil producer in the Organization of Petroleum Exporting Countries.

OPEC is ``not happy'' with high oil prices, Abdalla Salem el-Badri, the group's secretary-general, said yesterday. The 12- nation group is unable to control prices because they aren't reacting to supply and demand, he said.

OPEC is meeting in Riyadh, Saudi Arabia, for a Heads of State Summit on Nov. 17-18, yet the group will defer any discussion of production quotas until a ministerial-level meeting in Abu Dhabi on Dec. 5, el-Badri said.

``We are watching the supply and demand,'' he said. ``We would like to see a stable market, a stable price.''