Crude Oil Up After EIA Inventory Report, Wednesday, August 29, 2007 11:33:55 AM

Crude oil prices surged after the Energy Information Administration released its report on U.S. oil inventories in the week ended August 24 on Wednesday, showing that crude oil and gasoline inventories fell by much more than analysts had expected. Light sweet crude for October settlement was up 98 cents to $72.71. Oil reached as high as $72.87, its highest mark in nearly two weeks, shortly after the EIA`s report. The rally helped oil erase the losses it saw on Tuesday when it snapped a streak of four straight winning sessions.

The inventory report showed that crude oil inventories fell by 3.49 million barrels following an unexpected increase of 1.89 million barrels in the previous week. Analysts had been expecting a much more modest decline of about 1 million barrels. Gasoline inventories also showed a notable decrease, falling by 3.67 million barrels after falling by 5.71 million barrels in the week ended August 17. The decrease far exceeded analyst estimates of a drop of less than 1 million barrels.

With the decrease, gasoline inventories fell for the fourth straight week, falling to their lowest level in almost two years. The EIA, a statistical agency of the Department of Energy, also said that inventories of distillate fuel, which include diesel and heating oil, increased by 889,000 barrels following a 1.36 million barrel increase in the previous week. The increase came roughly in line with analyst estimates.

Oil finished down 24 cents on Tuesday on a choppy day of trading after moving as high as $72.25, a 12-day high, in early trading. Crude was pushed lower as the Conference Board revealed that consumer confidence for August plunged to 105, the largest drop since Hurricane Katrina in 2005. This renewed general economic concerns in the U.S., raising the prospect of reduced demand in the U.S.

The inventory report also pushed the prices of RBOB gasoline, which added 3.96 to trade at $2.055. Gasoline for September delivery touched a 26-day high of $2.0608 earlier in the morning. Heating oil also jumped up, adding 3.02 cents to move at $2.0265. September-stamped heating oil touched a two-week high of $2.0328 in morning activity.

Meanwhile, natural gas prices declined in morning trading. September-dated natural gas was at $5.53, down 4.3 cents. Prices gained on Tuesday, breaking a streak of five straight losing sessions that cut natural gas by more than $2.00.

Gold prices gained in U.S. trading Wednesday, after falling in its two previous sessions. December-dated gold was at $675.00, up $1.50 on the session. Prices were pushed higher as the U.S. dollar saw weakness in trading against the euro and dollar throughout the morning. Silver gained 10.5 cents to move at $11.87 on Tuesday morning in the U.S. The metal has gained in two of its previous three sessions as the U.S. dollar declined. Overall, silver has been range-bound for 12 days. Copper pared its losses in later morning trading. The red metal dropped 1.35 cents to trade at $3.298. Copper had reached as low as $2.2535 following a global inventory report that showed stockpiles rose by 8%.

The economic calendar is light in the U.S. on Wednesday. Traders are looking ahead to several key reports on Thursday. Included on the schedule will be GDP price index data for the second quarter as well as weekly jobless claims figures. Friday will bring the release of PCE deflator data.

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