Crude Futures Waffle After Inventories Fall

Wednesday, November 21st 2007, 7:47 am

By: News On 6

NEW YORK (AP) _ Energy futures wavered, hesitating on a drive to $100 a barrel Wednesday after the government reported that oil inventories fell unexpectedly last week, but that supplies at a closely watched oil terminal in the Midwest rose for the first time in weeks.

Inventories of distillates including heating oil dropped more than expected, and crude imports fell, in a mixed report that analysts said didn't do much to change a prevailing view that oil supplies are tight amid rising demand.

``It's two steps forward, then one back in terms of this week's inventory cushion,'' said Tim Evans, an analyst at Citigroup Inc. in New York.

``Not exciting enough to get us over the hump just yet,'' concurred Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, referring to the $100 a barrel mark.

Light, sweet crude for January delivery fell 34 cents to $97.69 a barrel on the New York Mercantile Exchange but alternated frequently between gains and losses. Before the inventory report, they had risen as high as $99.29 a barrel in electronic trading to break the previous intraday record of $98.62 set earlier this month.

Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

Other energy futures were mixed. December gasoline fell 1.1 cents to $2.4405 a gallon on the Nymex, and December heating oil rose 0.52 cents to $2.6953 a gallon.

December natural gas fell 1.6 cent to $7.461 per 1,000 cubic feet.

In London, December Brent crude fell 24 cents to $95.25 a barrel on the ICE Futures exchange.

At the pump, meanwhile, gas prices fell 0.1 cent overnight to a national average of $3.089 a gallon, according to AAA and the Oil Price Information Service. Prices have fallen 2.3 cents since last week, and are almost 14 cents below the record price of $3.227 a gallon set in May.

In its weekly inventory report, the Energy Department's Energy Information Administration said oil inventories rose by 1.1 million barrels during the week ended Nov. 16. Analysts surveyed by Dow Jones Newswires, on average, had expected an increase of 700,000 barrels.

However, inventories at the closely watched Nymex delivery terminal in Cushing, Okla., rose last week by 1.2 million barrels. It was the first substantial increase in Cushing stocks in weeks, and the largest since a 1.9 million barrel increase during the week ended Aug. 31.

The Cushing terminal is the physical delivery point for Nymex crude. Falling supplies there are seen as a symptom of a tight market. Those concerns ease when Cushing inventories rise.

Refinery activity fell by 0.7 percentage point last week to 87 percent of capacity. Analysts had expected activity to grow by 0.4 percentage point to 88.1 percent of capacity.

Supplies of gasoline rose last week by 200,000 barrels. Analysts had expected a 700,000-barrel increase.

And inventories of distillates, which include heating oil and diesel fuel, fell by 2.4 million barrels. Analysts had expected distillate supplies to fall by 300,000 barrels.

Crude imports fell last week by an average of 667,000 barrels a day to 9.8 barrels a day. Gasoline imports rose last week by 110,000 barrels a day to an average of 1.1 million barrels a day.

Gasoline demand rose by 35,000 barrels last week, and by 0.3 percent over the last four weeks compared to the same period last year, the EIA said.

Analysts cautioned that trading in energy futures could be volatile Wednesday due to light volumes before the Thanksgiving holiday. The Nymex will be closed Thursday and will close early Friday.

``In a low volume, pre-holiday market, it would not need much more than a large pension fund implementing an increased asset allocation in commodities to trigger a significant rally,'' said Olivier Jakob, an analyst at Petromatrix in Switzerland, in a research note.