Oil Trades Near Record on OPEC Output, Drop in U.S. Inventories

Crude oil traded near a record $104.95 a barrel in New York after U.S. fuel inventories dropped and OPEC refrained from raising production.

The Organization of Petroleum Exporting Countries agreed to maintain output targets at a meeting yesterday in Vienna. U.S. inventories fell for the first time in eight weeks, the Energy Department said.

Those factors encouraged buying here in Asia, extending what we saw in the U.S., said Tetsu Emori, a fund manager at Astmax Ltd. in Tokyo. The drop in U.S. inventories, which generated panic-like buying, was a surprise. Crude oil, which has not seen the gains recorded by core commodities, suddenly emerged center stage.

Crude oil for April delivery was at $104.35 a barrel, down 17 cents, in after hours electronic trading on the New York Mercantile Exchange at 10:51 a.m. in Singapore.

Oil rose $5 to settle at $104.52 a barrel yesterday, a record close and the biggest one-day increase since Jan. 30, 2007. Futures earlier touched the highest since trading began in 1983.

Brent crude for April settlement was trading 12 cents lower at $101.52 on London's ICE Futures Europe at 10:50 a.m. in Singapore. Yesterday the contract rose $4.12, or 4.2 percent, to $101.64 a barrel exchange, a record close. Futures reached a $102.29 a barrel on March 3, the highest-ever intraday price.

U.S. Supplies

Crude-oil supplies fell 3.06 million barrels to 305.4 million in the week ended Feb. 29, according to the Energy Department. A 2.4-million-barrel gain was forecast, according to the median of responses by 15 analysts surveyed by Bloomberg.

Crude oil processing at U.S. refineries rose to the highest in six weeks, climbing 1.2 percentage points to 85.9 percent for the week ended Feb. 29, the Energy Department reported.

On the heels of OPEC's decision, this week's U.S. oil statistics turned out to be bullish, said Harry Tchilinguirian, a senior oil market analyst with BNP Paribas SA. OPEC's decision to roll over output quotas is likely to cap any significant crude oil inventory builds ahead of the summer as Atlantic Basin refiners emerge from maintenance and increase crude demand.

U.S. refiners typically lift crude-oil processing toward the end of the second quarter to meet summer demand.

Supplies of distillate fuels, a category that includes heating oil and diesel, fell 2.33 million barrels from 117.6 million barrels last week, the report showed.

Heating oil for April delivery rose 15.13 cents, or 5.4 percent, to $2.9431 a gallon, a record close. The contract touched $2.9491, the highest intraday price since trading began in 1978.

Colombia, Ecuador

Colombia and Ecuador, an OPEC member, moved closer to settling a dispute stemming from Colombia's cross-border military incursion to kill a rebel leader last week.

The deal calls for Organization of American States Secretary-General Jose Miguel Insulza to form a panel to probe the incident and convene a meeting of foreign ministers to consider the results.

It may help lower tension in the region, and comes as Venezuela, the fourth-largest supplier of crude tom the U.S., moved tanks to the Colombian border on orders from President Hugo Chavez, who said Colombia's March 1 strike risks a war.