Inventories of crude increased 1.14 million barrels to 326.6 million last week, the highest since Aug. 31, 2007, the Energy Department said. Supplies of gasoline and distillate fuel also rose. Fuel demand dropped 6 percent, the largest one-week decline in almost five years, as the Federal Reserve reported the U.S. economy weakened further in the past month.
Crude oil for February delivery fell 50 cents, or 1.3 percent, to $37.28 a barrel at 2:46 p.m. on the New York Mercantile Exchange, the lowest settlement since Dec. 24. Futures are down 60 percent from a year ago.
Inventories of crude oil were forecast to rise 2.5 million barrels in the week ended Jan. 9, according to the median of 15 analyst estimates in a Bloomberg News survey. The increase last week left stockpiles 10 percent higher than the five-year average for the period, the department said.
Supplies at Cushing, Oklahoma, where oil that’s traded on Nymex is stored, climbed 2.5 percent to 33 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.
The price of oil for delivery in February 2010 is 61 percent more than for the front-month contract, allowing traders to profit if they have the ability to store crude. February crude traded at a $6.91 discount to March. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango.
Volume in electronic trading on the exchange was 637,423 contracts as of 3:04 p.m. in New York. Volume totaled 762,289 contracts yesterday, up 62 percent from the average over the past 3 months. Open interest yesterday was 1.25 million contracts. The exchange has a one-day delay in reporting open interest and full volume data.
Brent crude oil for February settlement rose 25 cents, or 0.6 percent, to settle at $45.08 a barrel on London’s ICE Futures Europe exchange.
The price of Brent oil in London for delivery in February is more than $7 a barrel higher than that for West Texas Intermediate oil, the grade that’s traded in New York, during the same month.
Gasoline stockpiles rose 2.07 million barrels to 213.5 million barrels, higher than the 1.85 million-barrel increase forecast in the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, surged 6.35 million barrels to 144.2 million barrels, the biggest gain since January 2004.
Gasoline futures for February delivery rose 1.88 cents, or 1.6 percent, to settle at $1.1677 a gallon in New York. Heating oil for February dropped 5.1 cents, or 3.4 percent, to end the session at $1.4631 a gallon.
Prices also declined on speculation that fuel demand will fall this year because of the recession in the U.S., Europe and Japan. Global oil consumption will average 85.1 million barrels a day this year, down 810,000 barrels from 2008, according to an Energy Department report yesterday.
Oil ministers from the Organization of Petroleum Exporting Countries agreed in Oran, Algeria, to cut supply by 9 percent starting Jan. 1 to 24.845 million barrels a day in an effort to bolster prices.
The market advanced early today after Saudi Arabia said February output will be lower than its OPEC target, while Venezuela expressed support for fresh reductions.