October 5th, 2011

Crude oil futures rose for the first time in four days after the U.S. government reported an unexpected stockpile decline in the world’s biggest crude-consuming country.

Crude oil futures climbed as much as 4.9 percent after the Energy Department said supplies fell 4.68 million barrels to 336.3 million last week. Inventories were forecast to increase 1.5 million barrels, according to a Bloomberg News survey. Fuel stockpiles also dropped in the week ended Sept. 30. Oil also rose as U.S. companies added more jobs than forecast last month.

“The DOE report is bullish, any way you look at it,” said Carl Larry, director of energy derivatives and research with Blue Ocean LLC in New York. “The key to where prices move from here is the economy.”

Crude oil futures for November delivery rose $3.54, or 4.7 percent, to $79.21 a barrel at 1:42 p.m. on the New York Mercantile Exchange. Oil traded at $77.77 before the release of the inventory report at 10:30 a.m.

Brent oil for November settlement advanced $2.58, or 2.6 percent, to $102.37 a barrel on the London-based ICE Futures Europe exchange. The contract’s close yesterday represented a 21 percent drop since April 8, when prices ended the session at $126.65 a barrel. A 20 percent drop is the common definition of a bear market.

Crude oil supplies at Cushing, Oklahoma, the delivery point for West Texas Intermediate crude, the U.S. benchmark, tumbled 831,000 barrels to 30.1 million, the lowest level since March 2010. Stockpiles at the hub have dropped 10 weeks, the longest stretch since 2007.

Fuel Stockpiles

Gasoline supplies declined 1.14 million barrels to 213.7 million last week, the report showed. A 1.5 million-barrel increase was forecast, according to the median of 15 analyst projections in the Bloomberg News survey.

Inventories of distillate fuel, a category that includes heating oil and diesel, decreased 744,000 barrels to 156.9 million, the department said. A 300,000-barrel drop was projected in the survey.

“Today’s report was bullish but I am still looking for spots to sell,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “We were at $90 a couple of weeks ago and have come down quite a lot. We dropped to the $75 area and found support and when it nears $80 I will sell.”

Yesterday, oil dropped as much as 3.4 percent to $74.95, the lowest intraday price since Sept. 24, 2010, on concern the U.S. and European economies are moving into recession.

Job Creation

ADP Employer Services showed companies in the U.S. added 91,000 jobs in September. Economists surveyed by Bloomberg News projected that Roseland, New Jersey-based ADP would report an advance of 75,000 jobs.

A Labor Department report in two days is forecast to show businesses added 90,000 jobs in September, according to the median forecast of economists surveyed.

Federal Reserve Chairman Ben S. Bernanke signaled yesterday he’ll push forward with further expansion of monetary stimulus if needed. He said that the Fed’s remaining tools to boost growth include giving more information about its pledge to keep interest rates low at least through mid-2013, reducing the rate paid on banks’ reserve deposits and buying more securities.

“The inventory numbers were clearly bullish and supportive,” said Kyle Cooper, director of research for IAF Advisors in Houston. “Whether we hold onto today’s gains later this week will depend on the macroeconomic picture and what equities do.”

OPEC Price

The Organization of Petroleum Exporting Countries’ basket of crude oil grades fell to $98.59 yesterday, the lowest level since Feb. 14. The 12-member group last met in June, when six members including Iran and Venezuela rejected a Saudi Arabian proposal to replace barrels lost during the conflict in Libya. OPEC next meets to discuss production on Dec. 14 in Vienna.

Saudi Arabia, OPEC’s biggest oil producer, vowed to use “an iron fist” after 11 members of the security forces were injured by attackers during unrest in a Shiite Muslim town in the east, the official Saudi Press Agency said.

The government accused an unnamed “foreign country” of seeking to undermine the stability of the kingdom as a result of the violence in Awwamiya, in which the assailants, some on motorcycles, used machine guns and Molotov cocktails, the Riyadh-based news service reported late yesterday. A man and two women were also injured, the news service said.

“There’s a little unrest in the Eastern Province of Saudi Arabia, which is always a cause for concern,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.3 billion.

Oil volume in electronic trading on the Nymex was 423,578 contracts as of 1:44 p.m. in New York. Volume totaled 789,626 contracts yesterday, 19 percent above the average of the past three months. Open interest was 1.43 million contracts.

- Mark Shenk in New York at Bloomberg.