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(Updates with recent price move, comments from broker)
By Brian Baskin Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Crude futures neared $80 a barrel Wednesday as the weeklong rally resumed following a brief dip following the release of U.S. oil and fuel inventory data.
Light, sweet crude for February delivery recently traded 67 cents, or 0.9%, higher at $79.54 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 72 cents higher at $78.36 a barrel.
Oil inventory data put out by the U.S. Energy Information Administration provided qualified support for futures, with a drop in fuel inventories boosting oil prices while crude stockpiles grew across most of the country.
Futures initially dropped after the data came out but have risen steadily since then, particularly once prices neared recent highs above $79 a barrel. That can trigger automatic orders to buy from companies known as "technical" traders that use mathematical formulas to make many trading decisions.
"It's all technical," which could mean futures are set to rally as high as $80.40 a barrel this week, said Tony Rosado, a broker with GA Global Markets.
Oil inventories fell by 1.5 million barrels nationwide, the U.S. Energy Information Administration said Wednesday, close to the consensus analyst forecast in a Dow Jones survey. But the decline was concentrated almost entirely on the West Coast, which is isolated by a lack of oil pipeline connections to the rest of the country. Excluding the West Coast, total U.S. inventories grew by 1.4 million barrels, snapping three weeks of declines.
Distillate stocks, including heating oil and diesel, dropped 2.1 million barrels, matching the consensus estimate, while the EIA also reported a 400,000-barrel drop in gasoline inventories, where analysts had anticipated a 400,000-barrel increase.
"It didn't offer anything to the bulls that would sustain this week's upward momentum," said Jim Ritterbusch, president of Ritterbusch and Associates, a trading advisory firm in Galena, Ill.
Recent declines in inventories have aided oil's ascent from below $70 a barrel in mid-December to nearly $80 a barrel today, but the support is widely seen as temporary. Cold weather in the U.S. Northeast is believed to be driving up demand for heating oil, while refiners are reducing oil imports to avoid end-of-year taxes on inventories. Refiners are still operating well below normal, raising utilization by 0.2 percentage point last week to 80.3% of capacity.
The question facing the market is whether inventories will continue to fall when the tax issue fades with the new year and the worst of winter is over. Market participants say oil's rally from below $70 a barrel earlier in December has halted just short of $80 a barrel in part due to uncertainty over supply levels.
Overall demand also dropped for a second week and is off 0.2% from a year earlier in the four weeks ended Dec. 25.
Front-month January reformulated gasoline blendstock, or RBOB, recently 2.74 cents, or 1.4%, higher at $2.0380 a gallon. January heating oil traded 1.10 cents, or 0.5%, higher at $2.1138 a gallon.
-By Brian Baskin, Dow Jones Newswires; 212-416-2453; brian.baskin@dowjones.com.
