(BN) Oil Rises to Two-Year High on U.S. Stockpiles, China


Oil Rises to Two-Year High on U.S. Stockpiles, China Processing
2010-11-11 06:40:08.936 GMT

By Ben Sharples and Ann Koh
Nov. 11 (Bloomberg) -- Oil climbed in New York to the
highest in two years after U.S. crude inventories unexpectedly
declined and as refiners in China, the world's biggest energy
user, increased processing rates to a record.
Crude gained for a second day after the Energy Department
said stockpiles fell 3.27 million barrels last week to 364.9
million. Supplies were forecast to increase 1.5 million barrels,
according to a Bloomberg News survey of analysts. Chinese
refiners processed 12 percent more crude in October from a year
earlier, according to China Mainland Marketing Research Co.
"The big thing has been the belter of an inventory report
out of the U.S.," said Ben Westmore, a minerals and energy
economist at National Australia Bank Ltd. in Melbourne. "While
the oil market is still in surplus, it does point to signs that
we're seeing some tightening."
Crude for December delivery rose as much as 64 cents, or
0.7 percent, to $88.45 a barrel in electronic trading on the New
York Mercantile Exchange. That's the highest price since Oct. 9,
2008. The contract was at $88.39 at 2:35 p.m. Singapore time.
Futures, up about 2 percent this week, have advanced every day
this month except for Nov. 9.
China's state oil companies are boosting processing in a
bid to ease diesel shortages in the country's south caused by
factories and farmers using more fuel. China Petroleum &
Chemical Corp., the nation's largest refiner, increased
production to a record in October, parent China Petrochemical
Corp. said on Nov. 4.

Fuel Supplies

Oil has rallied more than 11 percent in 2010 as depleting
fuel stockpiles in the U.S., the largest crude consumer,
signaling a recovery in demand.
Distillate fuel inventories, including heating oil and
diesel, fell 4.97 million barrels to 159.9 million, the seventh
weekly drop, according to yesterday's Energy Department report.
That's the biggest volume decrease since February 2007. Supplies
were forecast to decline 2 million barrels, based on the
Bloomberg News survey.
Gasoline stockpiles dropped 1.92 million barrels to 210.3
million, the lowest level since November 2009, the report showed.
A 1 million-barrel drawdown was projected.
Refineries operated at an average of 82.4 percent of
capacity, up 0.6 percentage point from the previous week, the
department said. Crude imports fell 5.7 percent to 8.09 million
barrels a day, the lowest rate since January.


Oil supplies at Cushing, Oklahoma, the delivery point for
New York futures, declined 1.75 million barrels to 31.8 million,
the biggest volume drop since September 2009. Stockpiles are at
the lowest level since the week ended April 2.
The longest period of contango in the U.S. oil market may
end as storage capacity at Cushing expands by more than a
quarter. New York crude traded at $1.73 a barrel less than the
six-month contract, compared with $9.88 in May. This contango,
in which prompt oil is cheaper than for later delivery, has
averaged $2.70 in the past five years.
Oil may rise further because prices have yet to reach a
Fibonacci retracement target used by technical traders,
according to Ken Hasegawa, a commodity derivative sales manager
at Newedge Group in Tokyo. Futures are below $89.84 a barrel,
the halfway point between the all-time high of $147.27 traded in
July 2008 and a low of $32.40 in December that year.
"Until the crude market goes up to the 50 percent rebound
line, it's still possible to go to the upper side," Hasegawa
said. "Brent is very near to $90 a barrel. That is a target
Brent crude for December settlement rose as much as 53
cents, or 0.6 percent, to $89.49 a barrel on the London-based
ICE Futures Europe exchange. Yesterday, the contract climbed 0.8
percent to settle at $89.

For Related News and Information:
Top energy, oil stories: ETOP <GO> and OTOP <GO>
News on oil inventories: TNI OIL INV <GO>
News on oil markets: NI OILMARKET <GO>
Global Energy Statistics: ENST <GO>

--Editors: John Viljoen, Ryan Woo.

To contact the reporters on this story:
Ben Sharples in Melbourne at +61-3-9228-8732 or
Ann Koh in Singapore at +54-5212-1509 or akoh15@bloomberg.net

To contact the editor responsible for this story:
Jane Lee in Kuala Lumpur at +603-2302-7855 or