Oil Skyrockets to $94
Matt Chambers has the latest on ever-resilient crude:
Crude-oil futures bolted to a fresh record high, rising after U.S. Department of Energy data showed a surprise fall in crude stockpiles and after the Federal Reserve cut rates by an expected quarter percentage point.
The front-month December light, sweet crude contract on the New York Mercantile Exchange rose $4.15, or 4.6%, at $94.53 a barrel, the highest settlement for a front-month contract. It reached an intraday record $94.74. Brent crude on the ICE Futures Exchange rose to an intraday record of $90.94 a barrel and closed at $90.49, up $3.05.
It was the second straight week that the data, put out by the DOE’s Energy Information Administration, showed an unexpected draw, and the second straight week it sent prices rocketing higher. A big draw in stockpiles at the Cushing, Okla., delivery point for New York Mercantile Exchange crude futures also pushed prices higher. Crude stockpiles at Cushing fell to a 2-year low.
The Federal Reserve cut its key lending rate for the second straight month to fend off an economic downturn. While the as-expected quarter-percentage point cut led to a slight pullback in crude because of some bets there would be a bigger cut, it was seen as supportive of prices because it puts pressure on the dollar and is seen helping U.S. demand.
Nymex crude prices have surged 15% this month on a confluence of factors, including sliding U.S. stocks; a weaker dollar; and concerns tensions between Turkey and Kurdish militants could spill over into northern Iraq and affect crude oil pipelines.
Today’s rise reverses a big price drop in the previous session that was made on expectations crude oil stockpiles would build, and after investment bank Goldman Sachs, a long-time forecaster of higher oil prices, advised traders to lock in gains made in the run up past $90.
In the inventory report, crude stockpiles fell, while refined products gasoline and distillates rose. The EIA said U.S. commercial crude oil stockpiles fell by 3.9 million barrels last week to 312.7 million barrels, compared with analysts’ expectations of a 100,000-barrel build in an earlier Dow Jones Newswires survey. Cushing stockpiles fell by 3.1 million barrels to 15.1 million barrels. Both total U.S. stocks and those at Cushing are at their lowest since October 2005. Refinery use fell 0.9 percentage point to 86.2% of capacity.
AIF’s Cooper said the draw in crude oil stockpiles was largely due to imports that have been at low levels for the past two weeks, and that these may reverse themselves in coming weekly reports. He also said builds in distillates and heating oil could pressure crude prices.
