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Dec. 27 (Bloomberg) -- West Texas Intermediate crude rose above $100 a barrel for the first time in two months after a government report showed U.S. supplies fell to the lowest level since September.
Prices capped a second weekly gain. Stockpiles decreased to 367.6 million barrels in the week ended Dec. 20, the Energy Information Administration said. Supplies of gasoline and distillate fuel, including diesel and heating oil, also dropped amid rising demand. Refineries operated at the highest rate in five months.
“We are seeing lower crude and product inventories and good demand, and $100 should be a pretty firm number for a while,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It supports expectations that the economy is getting stronger and demand should be higher.”
WTI for February delivery rose 77 cents, or 0.8 percent, to $100.32 a barrel on the New York Mercantile Exchange. It was the highest settlement, and the first above $100, since Oct. 18. Prices are up 9.3 percent this year and gained 1 percent this week. The volume of all contracts traded was 47 percent below the 100-day average at 3:52 p.m.
Brent for February settlement advanced 20 cents to end the session at $112.18 a barrel on the London-based ICE Futures Europe exchange, the highest close since Dec. 3. Prices are up 1 percent this year. Volume was 43 percent below the 100-day average. The European grade’s premium to WTI narrowed for a third day to $11.86.
“Moving above $100 is certainly important psychologically,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.
Crude inventories fell by 4.73 million barrels, down for a fourth week, the EIA, the Energy Department’s statistical arm, said. Analysts surveyed by Bloomberg had forecast a drop of 2.65 million barrels. The EIA released its weekly petroleum report at 11 a.m. today in Washington, two days later than usual because of Christmas.
Gasoline supplies slid 614,000 barrels to 219.9 million and distillate decreased 1.85 million barrels to 114.1 million. Gasoline demand rose 1.8 percent to an average 9.18 million barrels a day. Consumption of distillate fuel increased 2 percent to 4.17 million.
“The U.S. economy continues to get stronger, which is good for demand,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Refineries are running at high rates, which is enhancing demand for crude.”
Refineries operated at 92.7 percent of their capacity, the most since July 12. Rising utilization boosted gasoline production by 4.3 percent to 9.72 million barrels a day, the highest level in EIA data going back to 1982.
Crude inventories also fell as companies in Gulf Coast states delayed imports and minimized supplies at the end of the year to reduce local taxes. Supplies in the Gulf Coast area, known as PADD 3, dropped 5.14 million barrels to 176.2 million.
“Some of the declines come from year-end destocking,” Lynch said.
WTI has jumped 8.7 percent since Nov. 27 as signs of economic growth spurred speculation that demand will strengthen. The U.S. is the world’s biggest oil-consuming country, accounting for about one-fifth of demand, according to BP Plc’s Statistical Review of World Energy.
The Federal Reserve is trimming its monthly bond purchases because of “cumulative progress and an improved outlook for the job market,” Chairman Ben S. Bernanke said at a press conference on Dec. 18 in Washington.
“Most of the economic news has been pretty good lately and that’s giving a boost to oil,” Lynch said. “We’ll see modest growth in demand next year.”
Crude also advanced as the euro climbed as much as 1.5 percent against the dollar to the highest level since October 2011. A stronger euro and weaker dollar increase crude’s investment appeal.
“The market is looking for a reason to move higher,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Inventories are falling. The dollar is down. All these factors are combining to try to push the market higher.”
Implied volatility for at-the-money WTI options expiring in February was 13.8 percent, up from 13 yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 261,781 contracts at 3:52 p.m. It totaled 128,074 contracts yesterday, the lowest level since Dec. 24, 2012. Open interest was 1.61 million contracts.
--Editors: Margot Habiby, Bill Banker