Updated from 12:30 p.m. EST
Oil futures rose Thursday as traders put a fairly bearish report on crude inventories behind them and turned their attention back to world politics.
Crude for February delivery closed up $1.10 at $66.83 a barrel, after losing 58 cents on Wednesday. The contract traded choppily after the Energy Department said crude stocks rose by 2.7 million barrels during the second week of January.
The rise in stocks was chalked up to a slowdown in domestic refining activity. Many refineries were closed for seasonal maintenance and consequently, capacity utilization dropped about 3%. When refiners operate at lower volume, it can push up inventories of their raw material, crude, said Rakesh Shankar, energy analyst at Economy.com in West Chester, Pa.
Analysts had called for a rise in crude inventories of as much as 2 million barrels. Supply numbers can be tough to predict because oil shippers are loath to share data and shipments can be delayed a week.
Crude returned to its level of earlier in the week, when traders fretted that a standoff with Iran and pipeline attacks in Nigeria could drastically slash inventories around the world. Reports that an Arab television station has an audio recording of Osama bin Laden threatening new attacks on the U.S. added to the geopolitical tension Thursday.
The strength in crude lifted natural gas prices 21 cents to $8.90 per million British thermal units. Inventories of natural gas, used to produce heat and electricity, dipped 46 billion cubic feet to 2.5 trillion cubic feet last week.
"This is as close to neutral as you can get," said Tim Runball, director of gas supplies and off-system sales at South Jersey Gas in Folsom, N.J. "The long-term weather is the real
reason we've seen a falloff in futures prices, and it's also a reflection of how much natural gas there is in storage."
While a drop is a drop, winter drawdowns are typically much larger as consumers crank up their furnaces. Inventories are 2.3% above the same period last year, and 14% above the five-year average.
Many utilities entered the winter heating season, which begins in November, with higher natural gas supplies than normal. Although colder-than-average temperatures hit the Northeast, the country's largest user of heating fuel, in the first part of December, gas supplies remain robust. South Jersey Gas, which serves 300,000 customers in southern New Jersey, expects to end the winter with gas in storage.
Cheaper natural gas is also prompting some utilities to purchase gas instead of drawing from their supplies. Natural gas with contracts for delivery in February and March is trading below summer gas prices by as much as 46 cents.
Distillates climbed by 900,000 barrels in the Energy Department report due to an increase in heating oil, as consumers used less fuel to keep their houses warm. Inventories of gasoline jumped by 2.8 million barrels despite flat production levels last week. Unleaded gasoline initially fell on the report, but closed up less than 1 cent to $1.77 a gallon. Heating oil moved up 4 cents to $1.79 a gallon.
In trading Thursday,
was rising $1.78, or 2.5%, to $71.80;
was adding 42 cents, or 0.7%, to $61.51, and
was up 28 cents, or 0.4%, to $64.18.
was inching up 70 cents, or 1.2%, to $60.36 after Morgan Stanley raised its target price $5 to $75 Thursday. The investment bank believes that worldwide demand will outpace capacity in the next two years by a factor of two-to-one.