Oil Falls After U.S. Supplies Surge the Most in Almost 4 Years

Oil Falls After U.S. Supplies Surge the Most in Almost 4 Years

Feb. 6 (Bloomberg) -- Crude oil fell more than $1 a barrel after the government reported that U.S. inventories surged the most in almost four years as refineries slowed operating rates and imports climbed.

Stockpiles rose 7.05 million barrels to 300 million barrels in the week ended Feb. 1, the Energy Department report showed. It was the biggest gain since March 2004. An increase of 2.6 million barrels was expected, according to the median of 14 responses in a Bloomberg News survey. Petroleum-product supplies also rose.

``These are probably the most consistently bearish DOE numbers you'll ever see,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``There was a larger- than-expected crude-oil build due to rising imports and lower refinery runs.''

Crude oil for March delivery fell $1.39, or 1.6 percent, to $87.02 a barrel at 12:48 p.m. on the New York Mercantile Exchange. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 48 percent from a year ago.

Brent crude for March settlement fell 90 cents, or 1 percent, to $87.92 a barrel on London's ICE Futures Europe exchange. Brent touched a record $98.50 on Jan. 3.

The Energy Department released its weekly report on inventories today at 10:30 a.m. in Washington.

Gasoline inventories climbed 3.59 million barrels to 227.5 million, the highest since February 1999, the report showed. A 1.9 million-barrel gain was forecast. Distillate-fuel stockpiles rose 135,000 barrels to 127.1 million. A 2.1 million-barrel decline was expected, according to the Bloomberg survey.

Above-Average Stockpiles

Stockpiles of crude oil last week were 1.4 percent above the five-year average for the period, the department said. Inventories were 1.8 percent lower than the average two weeks earlier, according to the department. Gasoline supplies were 4.2 percent above the average and distillate inventories were 0.1 percent below.

Refineries operated at 84.3 percent of capacity, down 0.6 percentage point from the prior week, the report showed. It was the lowest rate since March 2006.

``The refinery numbers are the big story,'' said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``Refinery margins across the U.S. are really weak so refiners are reducing runs.''

Crude-oil imports jumped 4.6 percent to 10.5 million barrels a day, the highest since August, according to the report. Imports of petroleum products surged 26 percent to 4.22 million barrels a day, the highest since May.

Economic Slowdown

Prices fell $1.61 a barrel in New York yesterday on concern the U.S. economy will slow, after the Institute for Supply Management reported that service industries unexpectedly contracted in January at the fastest pace since the 2001 recession. The U.S. consumes about a quarter of the world's oil.

``Prices may move substantially lower if the economy keeps worsening and OPEC continues to boost production,'' said Rick Mueller, director of oil practice at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``There could be a series of large inventory builds as demand slips. Prices could easily fall into the $70s if this occurs.''

The Organization of Petroleum Exporting Countries raised oil output for a fifth straight month in January as prices surged to records, a Bloomberg News survey showed. Production rose 120,000 barrels a day to 32.12 million barrels a day last month, according to the survey of oil companies, producers and analysts.

``OPEC production is coming on strong,'' Samples said. ``With prices near $100 a barrel there was no reason not to produce as much oil as possible last month. Because of the lag we will be seeing those barrels in the weeks ahead.''

BLOOMBERG