The price of crude oil rose to a two-month high on the New York futures market Wednesday after the U.S. Energy Department said inventories decreased as refineries ramped up operations, increasing demand for crude.
Prices gained for a fourth day as stockpiles fell to 371.6 million barrels, the least since Oct. 12, and refineries ran the most since August. Petroleum consumption rose to the second- highest level this year and demand for distillate fuels including heating oil and diesel increased to the greatest amount in 2012.
“Crude oil runs are strong and that’s bullish,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “Crude demand is higher due to the refinery runs. The product markets are very strong.”
Crude oil for January delivery rose $1.58, or 1.8 percent, to settle at $89.51 a barrel on the New York Mercantile Exchange. The four-day streak of gains is the longest since September. January futures expired at the close of floor trading Wednesday. The more-active February contract advanced $1.58, or 1.8 percent, to $89.98.
Brent crude for February settlement increased $1.53, or 1.4 percent, to $110.37 a barrel on the London-based ICE Futures Europe exchange. Brent’s premium to February WTI narrowed by 5 cents to $20.39 a barrel.
WTI has declined 9.4 percent in 2012 as a U.S. shale boom deepened the glut at Cushing, Oklahoma, America’s biggest storage hub. That has left it at an average $17.40 below Brent this year, compared with a premium of about 95 cents in the 10 years through 2010. Brent, the benchmark grade for more than half the world’s crude, has risen 2.8 percent this year.
The 964,000-barrel decline in crude supplies was less than the forecast decrease of 1.75 million that was the median estimate in a Bloomberg survey of 11 analysts. Refineries operated at a 91.5 percent rate, up 1.1 percentage points from the previous week and the most since Aug. 10.
“The 91 percent utilization rate leads to stronger demand for crude oil,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There is some concern about further destocking for those crude inventories into the end of the year.”
Oil stockpiles have dropped during December in the past six years, Energy Department data show. Companies in Texas can be taxed on the value of stored crude as part of local property taxes, R.J. DeSilva, an Austin-based spokesman for the Texas Comptroller of Public Accounts, said in an e-mail.
The Energy Department also said inventories of distillates dropped 1.09 million barrels to 117 million. They were forecast to rise 1 million. Gasoline supplies gained 2.21 million barrels to 219.3 million, more than the 2 million increase expected by analysts.
Total consumption of fuels jumped 1.13 million barrels a day, or 6 percent, to 20 million, the most since Aug. 10. Distillate demand surged 20 percent to 4.21 million barrels a day, the most since Dec. 16, 2011.
“The report is bullish for the market,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “Demand is stronger, especially distillates, and oil is building its momentum.”
Investors also watched the budget talks in Washington. More than $600 billion in spending cuts and tax increases, known as the fiscal cliff, is set to start in the U.S. in January unless an agreement to avert the measures is reached.
“There is a more optimistic tone in the budget talks,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “It won’t surprise me to see oil move up to the $90 area.”
The House may vote Thursday on House Speaker John Boehner’s “Plan B,” which would raise tax rates on income over $1 million, rather than the $400,000 threshold that President Barack Obama proposed in his latest offer. Obama said he would veto Plan B.
The president said Tuesday at the White House that he’d “like to get it done before Christmas.”
Electronic trading volume on the Nymex was 435,557 contracts as of 2:31 p.m. Volume totaled 439,704 contracts on Dec. 14, 14 percent below the three-month average. Open interest was 1.49 million, the least since Nov. 19.
© Copyright 2014 Bloomberg News. All rights reserved.