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Oil ends higher after home prices data; inventories rise
By Moming Zhou & Polya Lesova, MarketWatch
Last update: 4:23 p.m. EDT April 22, 2009


NEW YORK (MarketWatch) -- Oil futures ended Wednesday's volatile trading slightly higher, as better-than-expected news on the housing front offset data that showed another buildup in U.S. crude inventories.

The Federal Housing Finance Agency index showed home prices rose in February for the second straight month. Separately, the government reported that U.S. crude inventories increased more than expected to their highest level in nearly 19 years.

Crude for June delivery rose 30 cents, or 0.6%, to end at $48.85 a barrel on the New York Mercantile Exchange. It lost nearly 2% earlier in the session, falling as low as $47.70.

U.S. stocks reversed earlier gains to finish mostly lower on Wednesday, with bank shares declining amid a slew of earnings reports. Morgan Stanley (MS:morgan stanley) reported another quarterly loss and trimming its dividend.

The S&P 500 Index (SPX:S&P 500 Index) fell 6.53 points, or 0.8%, to 843.55. See Market Snapshot.

The earlier strength in U.S. equities kept "crude oil afloat," said Burton Schlichter, senior market strategist at Daniels Trading.

"However, fundamentally and technically the crude oil market is bearish," he said.

In after-hours electronic trading, June crude futures fell 18 cents, or 0.3%, to $48.69 a barrel on Globex.

Crude supplies rise

Crude inventories increased 3.7 million barrels to 370.6 million barrels, the highest level since September 1990, the Energy Information Administration reported. Analysts surveyed by Platts had expected a buildup of 3 million barrels.

Late Tuesday, the American Petroleum Institute, which uses a different methodology than the EIA, reported inventories declined by 1 million barrels.

"This [government] data are too bearish for the market to ignore. If this doesn't chase the bulls back into the barn, there is little that will," said James Williams, an economist at energy research firm WTRG Economics.

The EIA, the statistics arm of the Energy Department, also reported that gasoline inventories rose 800,000 barrels and distillate stockpiles, which include heating oil and diesel, rose 2.7 million barrels. Analysts had expected a decline in both gasoline and distillate inventories.

The API reported that gasoline supplies rose by 107,000 barrels and distillate stocks increased by 458,000 barrels.

The EIA report also showed that weak demand triggered the inventories buildup. Total demand for petroleum products in the past four weeks fell 6.5% from a year ago. Among them, gasoline demand fell 0.4% while distillate consumption slumped 9.4%.

U.S. refineries operated at 83.4% of their operable capacity last week, higher than a week ago but still in a low range.

In other energy trading, May reformulated gasoline fell 2.38 cents, or 1.7%, to $1.3906 a gallon and May heating oil dropped 1.79 cents, or 1.3%, to $1.3299 a gallon.

May natural gas futures gained 2.1 cents, or 0.6%, to $3.532 per million British thermal units.

The EIA will report last week's natural-gas inventories on Thursday. Analysts surveyed by Platts expect an increase of 41 billion cubic feet to 46 billion cubic feet.

Moming Zhou is a MarketWatch reporter based in New York.
Polya Lesova is a New York-based reporter for MarketWatch.

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