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Oil prices rise above $77 on inventory data

By Babs Odukoya
25 December 2009   |   11:23 am
CRUDE oil prices traded little changed after a government report yesterday showed a larger-than-expected decline in U.S. stockpiles, signaling a recovery in fuel demand in the world's largest energy consumer. U.S. crude inventories fell for a third straight week, dropping to the lowest level since January, according to Wednesday's report. "The inventory report was a key catalyst for the market," said Paul Harris, head of natural resources risk management at the Bank of Ireland in Dublin. "That moved the market sharply."

Crude oil for February delivery fell 17 cents, or 0.2 per cent, to $76.50 a barrel in electronic trading on the New York Mercantile Exchange as of 1:27 p.m. London time. It earlier traded as high as $77.48 a barrel, the highest intraday price since December 4. There will be no trading tomorrow on Christmas Day, or on January 1 for New Year’s Day.

Pumping has restarted through Iraq’s 450,000 barrel-a-day oil export pipeline to Turkey after an explosion forced its closure on December 20, Turkey’s Energy Ministry said.

Volume through the link should return to normal in a few days, a ministry official in Ankara said today, speaking on condition of anonymity.

U.S. crude stockpiles had the biggest one-week decline since September as supplies fell 4.84 million barrels to 327.5 million, more than the 1.6 million barrels forecast in a Bloomberg survey before the report.

Oil has gained 73 per cent this year, poised for its biggest yearly gain in a decade.

Brent crude oil for February settlement fell 35 cents, or 0.5 per cent, to $75.10 at 1:26 p.m. on the London-based ICE Futures Europe exchange. Yesterday, it rose $1.99 to end the session at $75.45 a barrel, the highest close since December 7.

The dollar index dropped 0.41 per cent on Wednesday. On Thursday, the index that measures the dollar against a basket of currencies, was down 0.11 per cent.

At the pump, the national average price of unleaded gasoline was unchanged from Wednesday at $2.584 per gallon, AAA said.

Rise in crude oil prices would result in higher realisations from crude sales for Indian oil exploration firms, thereby giving a rise in their profitability.

Meanwhile, oil explorers are booming on the Indian bourses as the crude prices hovered above $77 per barrel.

India’s largest state-run oil exploration firm, Oil & Natural Gas Corporation Limited gained 1.16 per cent to Rs.1192.25, while Oil India Limited reported marginal gains of close to 0.5 per cent at Rs.1250.55 in the morning trades yesterday.

Cairn India Limited advanced 1.63 per cent to Rs.283.25, giving a boost to the sectoral index, BSE Oil & Gas to 10,378.62 points with gains of 0.51 per cent.