Crude, Distillates Settle Higher - TheStreet

Crude, Distillates Settle Higher

Crude oil for January delivery adds close to $2 during Wednesday's session as natural gas prices backtrack.
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) -- Crude oil futures gained nearly $2 Wednesday after a government report Wednesday said oil and distillate fuel inventories declined more than expected last week.

The Energy Information Administration reported a surprise 3.7-million barrel plunge in crude stockpiles for the week ended Dec. 11. The draw down far outpaced the 2 million barrel decline forecast by a group of analysts polled by Platts. Even more so, the showing was well off the American Petroleum Institute's own estimate of a 924,000 barrel increase provided on Tuesday.

The January crude delivery contract hit a session high of $73.37a barrel before settling Wednesday's session up by $1.97, or 2.8%, at $72.66.


U.S. Oil Fund

(USO) - Get Report

ETF surged after the release and closed ahead by 81 cents, or 2.3%, at $36.74. Shares of major integrated oil companies closed in mostly positive territory although

Exxon Mobil

(XOM) - Get Report

was an exception, finishing lower by 74 cents, or 2.3%, at $36.74.


(CVX) - Get Report



(COP) - Get Report

added 0.7% and 0.4%, respectively. The NYSE Arca Oil Index and Philadelphia Oil Service Sector Index were 0.7% and 1.4% higher.

The EIA went on to say that distillate fuel stocks also fell by a far-steeper-than-expected 2.9 million barrels, though analysts anticipated a drawdown of only 750,000 barrels. Gasoline inventories rose by 900,000 barrels, falling short of a forecast for a 1.5 million barrel buildup. Despite the bullish sounding figures, the report also noted that refineries reduced production by shuttering some operations last week, as the factory utilization rate dropped by 1.1% to 80% capacity.

"With crude runs declining yet again, refiner output of nearly every refined product with the exception of jet fuel was down. Most notably, production of middle distillates fell 268,000 barrels per day to 3.726 million barrels per day, 891,000 barrels per day below the same week one year ago," said Platts senior oil analyst Linda Rafield.

The January heating oil contract settled up by close to7 cents, or 3.3%, at $1.97 a gallon. The January delivery contract for reformulated gasoline also advanced, by 3 cents, or 1.6% to $1.87 a gallon.

The advance in futures came on the same day that the

Federal Reserve's

Federal Open Market Committee opted to keep rates unchanged at extremely low levels. Forecasters expected the

Fed's policy-making arm to maintain low interest rates in the near term even as inflation fears were stoked on Tuesday after the Labor Department said that

wholesale prices jumped by an unexpected 1.8% in November. Some of those same fears eased this morning after a separate report showed

consumer prices rose in-line with expectations last month.

Natural gas futures backtracked on Wednesday after touching 11-month highs this week. The January contract shed 6 cents, or 1.1%, to settle at $5.46 per million British thermal units. The

U.S. Natural Gas Fund

(UNG) - Get Report

fell 0.8%, to close at $10.07.

On Thursday, the U.S. Energy Information Administration releases its natural gas storage report for the week ended Dec. 11. Analysts polled by Platts are anticipating a withdrawal of 176 to 180 billion cubic feet.

-- Written by Sung Moss and Melinda Peer in New York