NEW YORK (AP) – Crude futures prices settled incrementally higher Wednesday on the New York Mercantile Exchange, reflecting gyrations in the natural gas market and concerns of continual draws in U.S.commercial oil supplies.
January light, sweet crude futures settled at $31.88 a barrel, up 12 cents after trading in a wide range from $31.50 to $32.63.
On London’s International Petroleum Exchange, January Brent settled up 3 cents at $29.66 a barrel.
While market participants mostly agreed on the strong influence of natural gas futures and inventory data on the petroleum complex, the debate continued about whether crude could sustain current price levels.
The federal Energy Information Administration said crude inventories fell 6.4 million barrels to 277.9 million barrels in the week ended Nov. 5, leaving stocks at the lowest level ever reported for the month of December. The EIA, a the statistical arm of the Energy Department, has been collecting the crude data since 1982.
The drawdown also left crude stocks 3 percent below a year ago and 9 percent below the five-year average. Oil inventories have tumbled by nearly 17 million barrels in the last three reporting weeks, according to the EIA.
“With this giant draw you’re at a level where refiners are starting to get nervous about inventories,” said Ed Silliere, a New York trader for Energy Merchant Corp., a supplier of energy products to independent marketers.
He added, however, that some in the market were now taking short positions, cashing out at high prices before they fell again. “I think the air is coming out of the balloon a little,” he said.
The most significant facet of trading Wednesday was the short-lived drop in crude prices not long after inventory data showed a hefty draw in oil supplies, said Mike Fitzpatrick, a New York broker for Fimat USA Inc., an energy products broker-dealer.
While crude rubbed out the loss, it showed a chink in the armor, he said.
Indeed, crude distanced itself by 75 cents from the day’s high before settlement.
The extent of natural gas’ sway over crude-oil and refined-product prices also was debated among market participants, especially as crude declined toward settlement while the products held onto their gains.
Fimat USA’s Fitzpatrick said natural gas probably wasn’t leading prices on the complex, despite its grip in past days.
Inventory reports were supportive, but the fact that crude rose only slightly on the day showed incipient weakness, he said.
“You’re seeing a point now where the market’s in general agreement that this may be a good place to sell, because we didn’t push any higher,” he said.
But Michael Guido, a New York hedge-fund strategist for Barclays Capital, said the complex was following natural gas and “will do so until further notice.”
January heating-oil futures settled up 0.18 cent at 88.84 cents a gallon, while gasoline futures for the same month closed 0.27 cent higher at 86.73 cents a gallon.
January natural gas futures slid 1.1 cents ahead of the close in thin, choppy trade, settling at $6.711 per 1,000 cubic feet.
He predicted many traders would shy away from selling until natural gas futures consistently settled below $6.50 per 1,000 cubic feet “to prove a confirmed top” in the market.
Meanwhile, the secretary-general of the Organization of Petroleum Exporting Countries, Alvaro Silva, reiterated Wednesday that the 11-member group was satisfied with the current level of oil prices, even though they continued to come above the top end of the group’s targeted range of $22 to $28 a barrel.
“The prices have risen and the average for the year is $28 a barrel, but we know this price isn’t a consequence of the market situation, because the market has good supply,” Silva said at an industry conference in Milan.
