Oil Rises to Record After U.S. Reports Unexpected Supply Drop

Robert Tuttle
Bloomberg
Wednesday, July 2, 2008

Crude oil futures rose to a record above $144 a barrel in New York after a U.S. government report showed an unexpected decline in inventories.

Supplies dropped 1.98 million barrels to 299.8 million last week, the lowest since January, the Energy Department said. Analysts in a Bloomberg News survey had predicted the report would show a 500,000 barrel rise in inventories. Prices also climbed as the dollar weakened.

“We dropped about 2 million barrels on crude and most everyone was looking for a slight build,” said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. “That leaves us somewhere around 7 to 8 percent below normal on crude stocks.”

Crude oil for August delivery rose $2.60, or 1.8 percent, to settle at $143.57 a barrel at 2:55 p.m. on the New York Mercantile Exchange. Futures touched a record $144.32 after the close of floor trading and have doubled in the past year.

Brent crude for August delivery rose $3.59, or 2.6 percent, to $144.26 a barrel on London’s ICE Futures Europe exchange. Futures touched a record $144.95 a barrel.

Oil’s appeal as a hedge against inflation may rise if the European Central Bank increases interest rates tomorrow, causing the dollar to fall. The European Central Bank will lift its 4 percent benchmark main refinancing rate by a quarter-percentage point tomorrow, according to 57 of 58 economists surveyed by Bloomberg News.

FULL ARTICLE @ Bloomberg