Also crude futures up today 91.08 ...
Oil Extends Biggest Rally in a Week on Forecast of Drop in U.S. Stockpiles
By Grant Smith - Jan 11, 2011 4:35 AM PT
Oil rose for a second day, extending its biggest rally in a week, as equities advanced and analysts forecast a drop in U.S. crude supplies.
Futures climbed 1.4 percent yesterday after the Trans- Alaska Pipeline System, which carries about 15 percent of U.S. oil output, was shut following a Jan. 8 leak, forcing companies to suspend most production from the North Slope. Crude stockpiles are forecast to have declined by 1.4 million barrels last week, the sixth weekly drop, according to a Bloomberg News survey before a report tomorrow.
“Investors are still hungry for commodity and oil investments,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “As the economic recovery is underway and demand on the rise, I wouldn’t be surprised to see higher oil prices in the next months, unless the economic situation fails to impress the market.”
The February contract gained as much as 68 cents, or 0.8 percent, to $89.93 a barrel in electronic trading on the New York Mercantile Exchange, and traded for $89.90 as of 12:31 p.m. London time. Brent crude for February settlement was up 62 cents at $96.32 a barrel on the London-based ICE Futures Europe exchange. It settled yesterday at $95.70, the highest since Sept. 30, 2008.
Brent’s premium to WTI climbed to $6.45 a barrel yesterday, the most since February, according to data compiled by Bloomberg, and was at $6.20 today. Crude in New York jumped the most in a week yesterday, trading as high as $89.98, following the closure of the 800-mile (1,300-kilometer) pipeline network that starts in Prudhoe Bay on the North Slope and runs to Valdez, the northernmost ice-free port in North America.
Equities Advance
The Stoxx Europe 600 Index added 1.1 percent at 7 a.m. in New York, led by banks as a measure of their credit risk improved for the first time in five days.
The partnership operating the line plans to try to return it to service this week, according to a person familiar with the plans who declined to be identified because the information isn’t public. Alyeska Pipeline Service Co. is “not going to speculate” on when the pipeline may be able to reopen, Katie Pesznecker, a spokeswoman, said by telephone.
“There has been some concern that because of the cold temperatures in the region and the fact that the leak occurred in a section of pipe encased in concrete, repairs may take longer,” Goldman Sachs Group Inc. wrote in a report dated yesterday. “The most recent reports, however, suggest that plans are being made to bypass the leak area, which could enable more expedited restart of the pipeline.”
Sufficient Inventories
Chevron Corp., which owns 1.4 percent of the Trans-Alaska system and takes crude in Valdez for use at its Richmond, California, refinery, said there were “no issues with crude-oil supply,” at the port.
“We understand there are millions of barrels of oil in storage at Valdez so crude is still being loaded and shipped,” Mickey Driver, a spokesman for the company, said in an e-mail.
Production from North Slope Oil fields has been reduced to 5 percent of normal output. Supplies fell to 46,238 barrels on Jan. 9, according to the Alaska Department of Revenue. The pipeline system transported an average 642,261 barrels a day last month, according to Alyeska’s website.
U.S. crude stockpiles were 335.3 million barrels in the week ended Dec. 31, according to the Energy Department. That is 6.4 percent higher than the average for the same period in the 5 years from 2005 to 2009, according to Bloomberg calculations.
The Energy Department report will probably show U.S. gasoline supplies increased 2.5 million barrels from 218.1 million barrels last week, according to the median of nine analyst estimates in a Bloomberg News survey. The report will probably show stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels from 162.1 million the previous week, the survey showed.
The industry-funded American Petroleum Institute publishes its weekly report today.
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