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Wednesday, September 14, 2011 4:13:13 PM
US oil inventories drop to seven-month low
By Javier Blas and Emiko Terazono in London
US commercial crude oil inventories have fallen to the lowest level since February in spite of the release of millions of barrels from the country’s strategic petroleum reserve, suggesting that the oil market was tighter than previously thought.
The US Department of Energy said on Wednesday that the country’s oil reserves fell by a hefty 6.7m barrels last week, against the forecast by Wall Street analysts of a drop of about 3m barrels, bringing the inventories to a seven-month low.
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“There is no surplus of crude oil in the US at the margin, even after the exceptional circumstances of a large-scale release of strategic inventories,” Barclays Capital noted recently.
Some analysts blamed the drop in inventories – the largest weekly fall year-to-date – on the impact of tropical storm Lee on US Gulf of Mexico oil production last week. But other analysts said that inventories had been falling over the weeks before the storm, signalling that the market was tighter than expected.
The DoE said that inventories dropped to 346m barrels, down from nearly 360m in late June, when Washington joined the International Energy Agency in releasing for only the third time in history the country’s strategic petroleum reserve.
Oil prices were mixed as investors focused mostly on economic woes in spite of signs of extreme tightness on the physical oil market, particularly in Europe.
In late afternoon trading in London, ICE October Brent crude rose 35 cents to $112.24 a barrel. But the November contract, more widely traded, fell 29 cents to $109.37 a barrel bringing the difference between the first and second contract to more than $2.80 a barrel, one of the highest levels in a decade. The wide difference between the October and November contracts was a sign of a tight spot market, traders said.
In New York, Nymex October West Texas Intermediate fell $1.27 to $88.95 a barrel.
BNP Paribas lowered its crude oil forecast for 2011 and 2012 amid downgrades in its economic outlook. Harry Tchilinguirian, oil strategist at BNP in London, cut the bank’s 2011 average price forecast for WTI by $2 per barrel to $95 while Brent was revised down by the same amount to $112 a barrel.
For next year, BNP cut its WTI forecast by $6 to $101 and lowered its Brent estimate by $8 to $116.
“Directionally we remain positive for 2012 as a whole,” said Mr Tchilinguirian.“In a low interest rate environment, oil has been the beneficiary of rises in risk appetite – and the victim of falls.”
He said the forecasts were a balancing act between the weaker economic outlook in the US and Europe and the supply situation, with uncertainty in Libyan production as well as doubts about future Opec production.
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