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Bloomberg: Oil Rises to a Record $82.51 After U.S. Inventories Decline

By Mark Shenk

Sept. 19 (Bloomberg) — Crude oil rose to a record $82.51 a barrel in New York after an Energy Department report showed a larger-than-expected U.S. inventory decline.

Supplies fell 3.87 million barrels in the week ended Sept. 14, the 10th drop in 11 weeks, the report showed. A 2.03 million barrel decline was expected, according to the median of responses by 16 analysts surveyed by Bloomberg News before the report.

Crude oil for October delivery rose 42 cents, or 0.5 percent, to settle at $81.93 a barrel at 3:02 p.m. on the New York Mercantile Exchange. Futures touched $82.51, the highest intraday price since trading began in 1983. Prices are up 33 percent from a year ago.

“The initial response was to look at the larger-than- expected drop in inventories, which pushed us to a new record,” said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. “Prices came off a bit because on second look that number isn’t that big a deal. We usually get big declines at this time of year and inventories are still ample.”

U.S. crude-oil inventories in the week ended Sept. 14 were 7.4 percent higher than the five-year average for the period, the department said.

Brent crude oil for November settlement rose 88 cents, or 1.1 percent, to $78.47 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since the contract began in 1989.

Refineries operated at 89.6 percent of capacity last week, down 1 percentage point from the week before, according to a report from the department. U.S. refiners often shut units for maintenance in September and October as gasoline demand falls and heating-oil use has yet to increase.

`Worrying Number’

“There was one very worrying number in the report,” Ritterbusch said. “We got a big 1.7 million barrel drop in Cushing, which shows that middle continent refineries are on line and demanding oil. This is bullish and is going to attract a lot more money from investors.”

Stockpiles at Cushing, Oklahoma, the delivery point for New York-traded West Texas Intermediate oil, fell 1.68 million barrels to 18.3 million last week, the report showed. Supplies at Cushing are the lowest since the week ended Dec. 2, 2005.

Refineries in the middle of the U.S. bolstered the amount of crude oil they processed last week, while nationwide the amount processed declined.

Oil in New York has touched records for six straight days because of concern that supply won’t keep up with growing demand. Prices rose yesterday after the Federal Reserve cut its benchmark interest rate by half a percentage point, more than economists had predicted. The central bank is trying to help sustain economic growth in the U.S.

Fund Money

“There is a lot of fund money that came into the market on expectations that the Fed would cut rates aggressively,” said Eric Wittenauer, an energy analyst at A.G. Edwards & Sons Inc. in St. Louis. “We’re in uncharted territory so it’s hard to know where they will take it next.”

Prices also climbed as Royal Dutch Shell Plc, BP Plc, ConocoPhillips and Chevron Corp. are among oil companies to evacuate non-essential workers from the Gulf of Mexico because of the threat of a possible tropical storm.

A large weather disturbance along the east coast of Florida may strengthen as it heads west into the Gulf, the National Hurricane Center said in an advisory.

“What happens next remains an open question,” said Tim Evans, an analyst with Citigroup Global Markets Inc. in New York. “The rate cut can be looked at as a spur for growth guaranteeing strong growth. It can also looked at as a warning that we are in great trouble and a recession is eminent.”

To contact the reporter on this story: Mark Shenk in New York at [email protected] .

Last Updated: September 19, 2007 15:52 EDT

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