Oil Little Changed After Falling on Gain in U.S. Fuel Supplies

By Christian Schmollinger and Angela Macdonald-Smith

Jan. 4 (Bloomberg) -- Crude oil was trading above $99 a barrel after falling from a record in New York on gains in U.S. gasoline and diesel inventories.

Gasoline supplies climbed 1.99 million barrels to 207.8 million last week, an Energy Department report showed, outpacing a 1.5 million-barrel increase predicted in a Bloomberg News survey. Distillate fuel supplies, including heating oil, rose instead of falling as expected. Crude futures yesterday touched a record $100.09 before closing lower.

``Heating oil supplies should be adequate to carry the U.S. through the remaining winter season,'' said Victor Shum, senior principal at consultants Purvin & Gertz Inc. in Singapore. ``The gain helps explain why the reaction from the market was lukewarm to the inventory report.''

Crude oil for February delivery traded at $99.29 a barrel, up 11 cents, in after-hours electronic trading on the New York Mercantile Exchange at 3:06 p.m. in Singapore. Yesterday the contract fell 44 cents, or 0.4 percent, to $99.18 a barrel. Prices are up 79 percent from a year ago.

Gasoline stockpiles are the highest since the week ended March 23, according to the department. Refineries operated at 89.4 percent of capacity, up 1.3 percentage points from the prior week.

Distillate fuels, including heating oil and diesel, rose 569,000 barrels to 127.2 million barrels, the Energy Department report showed. A 600,000-barrel decline was expected, according to the median of 15 responses to the survey.

`Adequately Supplied'

``The levels of stockpiles indicate markets seem to be adequately supplied, so there's not too much concern around about a physical shortage,'' said Gerard Burg, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. ``There seems to be a continual acceptance of prices at higher levels.''

The department released its weekly report on inventories at 10:30 a.m. yesterday in Washington, a day later than usual because of the New Year's Day holiday.

Crude-oil inventories fell 4.06 million barrels to 289.6 million, the report showed. A decline of 2.25 million barrels was expected, according to the survey.

Brent crude for February settlement rose 35 cents, or 0.4 percent, to $97.95 a barrel on London's ICE Futures Europe exchange at 3:06 p.m. Singapore time. Yesterday, the contract fell 24 cents, or 0.3 percent, to close at $97.60 a barrel. Futures touched $98.50 earlier in the session, the highest intraday price since trading began in 1988.

OPEC Unable

The Organization of Petroleum Exporting Countries is unable to counter the rally because soaring prices are being driven by speculators, Libyan and Qatari officials said yesterday.

Indonesia, OPEC's second-smallest producer, will propose OPEC increase supply by at least 500,000 barrels a day when it meets on Feb. 1 in Vienna to reassess production targets, Indonesian OPEC Governor Maizar Rahman said yesterday. OPEC members ``don't want prices to stay so high,'' he added.

The group may wait to see how the market is acting when at the time of its meeting before making a decision on prices, said Purvin & Gertz's Shum.

OPEC will ``look ahead into the spring season of the year, which is the weak demand season for the year,'' said Shum. ``So if on Feb. 1, the futures market isn't as red-hot, then they may decide not to do anything.''

Alternative Fuels, Mexico

Prices near $100 a barrel, if sustained, should drive more rapid development of non-conventional fuels such as those based on shale oil, tar sands, coal-to-liquids and biofuels, National Australia's Burg said.

``The thing is, at what point do we start to see alternative forms of supply really coming on quite strongly?'' Burg said. ``We know there is a level at which alternative fuels are economically viable, yet there has to be this consideration of a sustained price rather than just a spike. But at these levels all these options are quite viable.''

Petroleos Mexicanos, Mexico's state-owned oil company, said two of its petroleum terminals reopened in the Gulf of Mexico, and planned to reopen a third after winds and rains closed the facilities on Jan. 1.

The Madero and Altamira terminals resumed shipments of crude oil for exports this morning, according to an e-mailed statement from Pemex, as the Mexico City-based company is known. Mexico is the third-largest supplier of crude to the U.S.

The Cayos Arcas terminal may reopen depending on weather conditions, Pemex said. The remaining terminals, including its largest, Dos Bocas, may reopen later today.