Oil Rises in New York as U.S. Crude Supplies Drop in Cushing

Crude oil rose in New York and traded at a premium to London's Brent benchmark for the first time since February after supplies dropped in the U.S. Midwest.

Crude stockpiles in Cushing, Oklahoma, where New York's West Texas Intermediate benchmark, or WTI, crude is priced, fell by 1.4 million barrels last week, the lowest since February, according to Department of Energy data. U.S. refineries increased runs to 91.7 percent of capacity for the same week, the highest this year.

``The most interesting thing is the fact that WTI for September has got to a premium over Brent,'' said Christopher Bellew, a broker with Bache Financial Ltd. in London. ``A lot of that is normalization of crude stock in Cushing.''

Crude oil for September delivery gained as much as $1.36, or 1.8 percent, to $77.24 in after-hours electronic trading on the New York Mercantile Exchange, a new 11-month high. It was at $76.90 at 10:26 a.m. in London. WTI traded at a 10-cent premium over Brent, the benchmark used to price about two-thirds of the world's oil.

Brent crude oil for September settlement rose as much as 84 cents, or 1.1 percent, to $77.16 a barrel on the ICE Futures exchange. It was at $76.80 in London.

U.S. oil stockpiles declined by 1.1 million barrels in the week to July 20, the Energy Department said yesterday. Below- average gasoline stockpiles unexpectedly increased by 793,000 barrels, aided by a resurgence in imports. Distillate inventories increased by 1.4 million barrels.

``The whole market is much more driven by crude rather than products,'' Bellew said. ``The recent refining runs have been improving in the States.''

End of Premium

Brent has lost its premium to WTI because of cutbacks in refinery output and changes in the crude making up Brent.

Hellenic Petroleum SA, Greece's biggest oil company, cut operations at its refinery because the cost of crude exceeded the profit from refined products, Merrill Lynch & Co. said yesterday. Preem Petroleum AB, a Swedish oil refiner, cut production this month at its refinery in Gothenburg to 75 percent of capacity.

Exxon Mobil Corp. had a ``short fire'' at its refinery in Fawley on the southern coast of England, David Eglinton, a company spokesman, said yesterday. He couldn't say whether production was halted or curtailed at the unit, which supplies 14 percent of the U.K.'s petroleum products.

The share of Buzzard crude in the North Sea Forties blend rose 3 percent last week to the highest level since the field began production in January. The percentage of Buzzard, a so-called medium-sour crude, increased to 27 percent in the week ended July 22, according BP Plc, the operator of the Forties Pipeline System.

Forties is one of the four North Sea oil grades that determine the price of dated Brent. Changes in the crudes that make up the blend can affect its quality and consequently its price.

Nigerian Supply

Royal Dutch Shell Plc said today it has no firm date for when it can return to full production in Nigeria. About 195,000 barrels of oil equivalent a day of its production remained shut down at the end of the second quarter.

Nigeria, Africa's biggest oil producer, has lost a quarter of its daily output because of unrest in the Niger River delta. The nation plans to ship 19 cargoes of the benchmark crude oil grades Qua Iboe and Bonny Light in September, four fewer than are scheduled for August.

Shell's venture in Nigeria has restarted a limited amount of production at pumping stations feeding its Nembe Creek pipeline and the Forcados export terminal, Eurwen Thomas, a company spokeswoman, said July 24. The South Bank flow station, linked to Forcados, started pumping in April, she said.

Thomas declined to say how much oil South Bank, which has a 36,000-barrel-a-day capacity, was producing. The Nembe Creek pipeline, shut down in May because of a leak, hasn't reached its 77,000-barrel-a-day capacity, she said.

In U.S. dollars, West Texas Intermediate, the New York-traded crude benchmark, has risen 4 percent in the past 12 months. It has dropped 4 percent in euros, 6 percent in British pounds and risen 7 percent in yen.

source:bloomberg.com