Oil Falls as U.S. Stockpiles Expected to Recover From Hurricane

Sept. 24 (Bloomberg) -- Crude oil in New York fell for the first time in seven sessions on expectations that U.S. stockpiles will rise in coming weeks as imports and production recover in the wake of Hurricane Ivan.

The Louisiana Offshore Oil Port, the biggest U.S. oil import terminal, resumed tanker unloading operations late yesterday after closing for the second time in two weeks because of Ivan. U.S. crude-oil supplies fell close to a 29-year low last week, as U.S. production plunged and platforms in the Gulf of Mexico shut as a precaution. Most platforms have reopened.

"History shows that these disruptions don't last long," said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. "Imports will recover after falling for two weeks due to the weather."

Crude oil for November delivery was down 31 cents, or 0.6 percent, at $48.15 a barrel on the New York Mercantile Exchange at 10:19 a.m. Prices touched $49 yesterday, the highest since reaching a record $49.40 on Aug. 20. Oil futures were up 70 percent from a year earlier. The November futures contract jumped 5.6 percent this week.

In London, the November Brent crude-oil futures contract was down 41 cents, or 0.9 percent, at $44.72 a barrel on the International Petroleum Exchange. Brent rose to $45.75 a barrel yesterday, the highest closing price since the contract began trading in 1988. Brent was up 5.3 percent for the week.

Strategic Petroleum Reserve

The U.S. may make loans to refiners from the U.S. Strategic Petroleum Reserve to make up for supply disruptions caused by the hurricane.

Oil refiners requested "small quantities" for a "short period of time," White House spokesman Scott McClellan said yesterday. The reserve holds a record 670 million barrels.

The Energy Department last released oil from the reserve in October 2002 after Hurricane Lili, when it loaned 296,000 barrels to a unit of Royal Dutch/Shell Group to help with disruptions to pipeline shipments.

U.S. crude-oil stockpiles fell 9.1 million barrels to 269.5 million in the week ended Sept. 17, the Energy Department said. Inventories are 5.8 million barrels from being the lowest since September 1975. It was the first time since 1988 that supplies had dropped for eight straight weeks. Refineries ran at 88.1 percent of capacity last week, a 7.6 percentage point decline.

"There was a huge drop in refinery runs last week," O'Grady said. "Refineries will not reopen right away; instead they will use the time to perform maintenance. This should also help crude oil stocks rise."

After Hurricane Lili in 2002 U.S. stockpiles soared 20 million barrels, or 7.4 percent, in four weeks as a backlog of imports arrived at ports on the Gulf of Mexico.

Crude oil in New York may rise to $50 a barrel next week as U.S. refineries increase purchases to refill inventories that are close to a 29-year low, according to a Bloomberg News survey of traders and analysts. Twenty-four of 41 respondents, or 59 percent, predicted an increase in futures. Fourteen forecast a decline and three said prices would be little changed.

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