Oil Trades Near $35

Crude oil traded near $35 a barrel on speculation that U.S. stockpiles climbed for the 19th time in 21 weeks as the deepening global recession saps fuel demand.
TradingEconomics.com, Bloomberg 2/18/2009 6:42:36 AM

An Energy Department report tomorrow will probably show U.S. crude-oil inventories rose 3.2 million barrels last week, according to the median of 11 analyst responses in a Bloomberg News survey. The Reuters/Jefferies CRB Index of 19 commodities prices fell yesterday to 203.25, the lowest since June 21, 2002, and has slipped 11 percent this year.

Crude oil for March delivery traded at $34.83 a barrel, down 10 cents, in electronic trading on the New York Mercantile Exchange at 12:38 p.m. London time. Earlier, the contract fell as much as 50 cents, or 1.4 percent, to $34.43 a barrel.

The March contract expires on Feb. 20. The more active April contract was at $38.69 a barrel, up 15 cents, at 12:42 p.m.

Manufacturing in New York declined in February at the fastest pace on record, and Japan’s economy shrank in the fourth quarter at an annualized rate of 12.7 percent, the most severe contraction since 1974, government reports showed over the past two days.

Prices for oil to be delivered in future months are higher than for earlier ones, a situation known as contango, allowing buyers to profit from hoarding oil. The price of oil for delivery in April is $4.20 a barrel higher than for March. December futures are up $14.29 a barrel from the front month.

The build in supplies at Cushing, Oklahoma, where West Texas Intermediate, the U.S. benchmark grade, is stored, has contributed to the contango. Inventories there climbed 1.7 percent to 34.9 million barrels last week, the Energy Department said on Feb. 11. It was the highest since at least April 2004, when the department began keeping records for the location.

Gasoline stockpiles probably declined 300,000 barrels in the week ended Feb. 13, the survey showed. Supplies of distillate fuel, a category that includes heating oil and diesel, probably dropped 1.5 million barrels.

Brent crude oil for April settlement was at $41.57a barrel, 54 cents higher, at 12:43 p.m. London time on London’s ICE Futures Europe exchange. It declined yesterday $2.25, or 5.2 percent, to end the session at $41.03 a barrel, the lowest since Dec. 30.

March Meeting

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, may cut production at a March 15 meeting if prices and markets are unstable, Iraqi Oil Minister Hussain al-Shahristani said.

If demand is going to stay down as it has done, then obviously we will need to cut production,” he said at a conference in Doha, Qatar, yesterday.

The 12-member group cut oil production 3.5 percent in January, according to a Bloomberg News survey. Producers with output quotas, all members except Iraq, pumped 26.2 million barrels a day, 1.355 million more than their target of 24.845 million barrels a day.