By Agency Reporter

Monday, 3 Jan 2011

SINGAPORE: Oil fell for a third day after a United States government report showed a smaller-than-forecast drop in crude inventories in the world‘s biggest consuming nation. Bloomberg reported on Friday.

Oil traded near $90 a barrel, headed for its highest annual close since 2007, as evidence the global economic recovery is gaining momentum stokes demand for raw materials.

Crude was little changed on Friday below $90 a barrel in New York, on course for a second yearly advance. Futures had the biggest drop in a month on Friday after a US Department of Energy report showed a smaller-than-forecast drop in crude inventories in the world‘s biggest oil-consuming nation.

”When the actual DOE numbers came out, that caused ongoing weakness,” Chief Investment Officer Cubit Asset Management Pte, in Singapore, Mark Keenan said. ”The market is very thin at the moment, so moves are slightly exaggerated. Nevertheless that was a number that wasn‘t anywhere near the number that predictions had in mind.”

Crude oil for February delivery declined as much as 36 cents, or 0.4 per cent, to $89.48 a barrel on the New York Mercantile Exchange and was at $89.57 at Singapore time. Prices have increased 13 per cent this year.

On Thursday crude fell by $1.28, or 1.4 per cent, to $89.84 a barrel, the first time it has settled below $90 since December 21. Oil closed at $79.36 a barrel last year and $44.60 in 2008. It ended 2007 at $95.98 a barrel, a record annual closing price.

US crude supplies decreased 1.26 million barrels to 339.4 million in the seven days ended December 24, the Energy Department said on Friday. That‘s less than the median forecast for a 2.85 million-barrel drop in a Bloomberg survey of 14 analysts.

Earlier this week, the industry-funded American Petroleum Institute said inventories rose by 0.9 per cent to 345.1 million barrels. Stockpiles of distillate fuel, including heating oil and diesel, unexpectedly rose. Gasoline inventories dropped.

Oil, which rallied by 78 per cent in 2009, is the third-worst performer this year among 22 commodities tracked by Bloomberg, as rising supplies countered optimism fuel consumption is recovering. Natural gas and cocoa are the worst performers.

Futures touched $91.88 a barrel on December 27, the highest since October 2008, amid signs the US economy is rebounding. Oil has risen in eight of the past nine years and fell by 54 per cent in 2008, the most in at least a quarter of a century.

Oil inventories have dropped by 5.6 per cent so far in December, the biggest monthly decline in four years. Supplies in states along the Gulf of Mexico, home to more than half of US stockpiles, have tumbled 12 per cent, the most in a single month in 30 years, as refiners sought to avoid year-end tax liabilities.

Gasoline supplies fell by 2.32 million barrels to 214.9 million. They were predicted to increase by 1.5 million. Overall distillate stocks were estimated to drop by 625,000 barrels.

Refinery utilization rose by 0.1 percentage point to 87.8 per cent. Total products supplied, a measure of demand, gained by 3.1 per cent last week to 20.7 million barrels a day, the highest level since May 2008, according to the Energy Department report.

Oil in New York may extend its decline next week, a Bloomberg survey of traders and analysts shows. Eighteen respondents, or 58 per cent, forecast crude futures will fall through January 7.

Brent crude for February settlement was at $92.99 a barrel, down 10 cents, on the ICE Futures Europe exchange in London. On Thursday, the contract dropped $1.05, or 1.1 per cent, to $93.09 a barrel.

Source: Punch