Oil Prices Dip on Rising Crude Inventories

By MADLEN READ

NEW YORK – Crude-oil prices slipped but held above $61 a barrel Wednesday after a U.S. petroleum inventory report showed an increase in crude stocks but a drop in distillate fuel inventories and refinery output – which are being closely watched as colder-than-usual temperatures hit many parts of the United States.

Still, markets were relatively calm Wednesday, as traders have largely priced in the chilly winter and disrupted production in the Gulf of Mexico.

“You know the old Wall Street adage, ‘Buy the rumor, sell the fact’? Here, it’s buy the forecast, sell the weather … You buy the expected weather, and sell it when it arrives,” said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.

Light, sweet crude for January slipped 22 cents to $61.15 a barrel in midday trading on the New York Mercantile Exchange.

Heating oil rose a penny to $1.8475 a gallon.

In the U.S. Department of Energy’s weekly report Wednesday, crude inventories rose 900,000 barrels in the week ending Dec. 9 to 321.2 million barrels, 11.7 percent above year-ago levels and well above the upper end of the average range for December.

U.S. stocks of distillate fuels, which include heating oil and diesel, slipped 100,000 barrels to 130.5 million barrels. Distillate inventories remain 5.2 percent above year-ago levels.

“It’s already showing that some of the weather has already had an impact on some supply,” said Tom Bentz, analyst at BNP Paribas Commodity Futures in New York, noting that crude inventories probably rose because refinery output was lower – causing a back-up in crude and less production of distillates.

“It’s a little bit early to be drawing inventories,” he added, saying that cold weather typically starts taking its toll on inventories in mid-January.

The report said refinery output slipped to 89.6 percent of capacity last week from 91 percent the previous week.

Natural gas, which reached an all-time intraday high of $15.78 per million British thermal units on Tuesday, fell 39.8 cents to $14.98 in midday trading.

Gasoline was little changed at $1.6460 a gallon.

U.S. gasoline stocks rose 1.8 million barrels to 204.4 million barrels, the Energy Department’s report said.

Supplies of distillate fuel, as well as natural-gas storage, have been under heavy scrutiny in recent weeks as many regions in the United States have seen temperatures well below the average for this time of year.

On Wednesday, forecaster AccuWeather Inc. said a pair of storms straddling the East Coast will cause the “second major winter weather scenario in less than a week.”

One will bring at least 10 inches of snow in Michigan while another will move up the coast, AccuWeather said.

Cold weather usually causes a rise in demand for heating-related oil products. The Northeast consumes up to 80 percent of total heating fuel used in the country.

With the world’s appetite for crude on the increase, the global buffer of spare oil has rapidly reduced and is partly blamed for the crude price spikes that began last year.

Which has at least one forecast predicting a “super-spike” in prices.

“Resilient energy demand, lackluster supply growth, and nonexistent spare capacity continue to underpin our view that we are in the early stages of a multiyear ‘super spike’ phase,” said Goldman Sachs in its latest energy review. This year could be the first year of the phase which could last five years, Goldman said.

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Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.