SINGAPORE (AP) – A surprise drop in US crude oil supplies pushed the price of oil to a new record above $95 a barrel in New York after-hours trading before it inched back Thursday in Asian trade.
The US Federal Reserve’s move to cut interest rates by a quarter point also supported prices.
It was the second week in a row the US Energy Information Administration reported a sharp and unexpected drop in oil inventories. Last week’s 5.3-million barrel decline sparked a 10-percent price rally.
“The decline in US crude oil inventories has been a key driver of oil prices,” said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.
Light, sweet crude for December delivery was trading at $95.21 a barrel in Asian electronic trading on the New York Mercantile Exchange, early morning in Singapore. Crude prices are near inflation-adjusted highs hit in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.
“We are stepping into an unknown area. Nobody wants to sell (given the fear of a) further rise,” broker Ken Hasegawa of Fimat Japan told Dow Jones Newswires.
The contract Wednesday rose $4.15 to $94.53 a barrel — the highest-ever settlement — then briefly touched as high as $95.80 a barrel in New York after-hours trade, setting a new trading record.
In its weekly inventory report, the US Energy Department’s Energy Information Administration said oil supplies fell by 3.9 million barrels last week. Analysts surveyed by Dow Jones Newswires, on average, had expected an increase of 100,000 barrels.
“The report acted to solidify concerns about the possibility of tightening market conditions ahead of the northern winter,” Moore said.
Much of that decline was due to a big drop in crude supplies at a closely-watched oil terminal in Cushing, Oklahoma.
Cushing supplies have been under pressure in recent months due to differences in the price between front-month oil contracts and those for delivery in future months. This price difference, or spread, has given storage tank owners a financial incentive to sell their oil, rather than hold it in inventory. Analysts have also blamed falling Cushing supplies, in part, for the rally in which oil prices have jumped 35 percent since August.
The EIA also reported that refinery activity fell by 0.9 percentage point last week to 86.2 percent of capacity. Analysts had expected an increase of 0.5 percentage point.
Supplies of gasoline rose last week by 1.3 million barrels. Analysts expected a 400,000-barrel decrease.
And inventories of distillates, which include heating oil and diesel fuel, rose by 800,000 barrels. Analysts had expected a one million barrel decrease.
Also supporting oil futures was the US central bank’s move to cut interest rates.
Interest rate cuts generally support oil prices because they tend to send the US dollar downward; the dollar is already at multiple-decade lows against major currencies.
Oil futures have been driven to record levels in recent months partly because they offer a hedge against a weak dollar.
Other energy futures followed oil’s lead. Nymex December heating oil rose 1.57 cents to $2.545 a gallon (3.8 liters) while December gasoline futures added 1.6 cents to $2.353 a gallon.
Natural gas futures advanced 2.9 cents to $8.359 per 1,000 cubic feet.
In London, December Brent crude rose $3.51 to $90.95 a barrel.