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WTI Crude Climbs After U.S. Inventories Tumble to 22-Month Low

Jan. 15 (Bloomberg) -- West Texas Intermediate crude advanced after a government report showed that U.S. inventories tumbled to the lowest level in almost 22 months.

Futures rose as much as 1.5 percent. The Energy Information Administration said crude supplies fell 7.66 million barrels to 350.2 million, bringing the decrease since Nov. 22 to 41.2 million barrels. That’s the largest seven-week decline in weekly data going back to 1982. WTI also increased after manufacturing in the New York region grew.

“This is a significant supply decline and prices are reacting appropriately,” said John Kilduff, partner at Again Capital LLC a New York-based hedge fund that focuses on energy. “There was speculation that the drops would shrink in size with the beginning of the new year. We’re going to have to go back and review some of our assumptions about the market.”

WTI for February delivery climbed $1.20, or 1.3 percent, to $93.79 a barrel at 10:43 a.m. on the New York Mercantile Exchange. The contract traded at $93.46 before the release of the report at 10:30 a.m. in Washington. The volume of all futures traded was 14 percent above the 100-day average. The grade has lost 4.7 percent in 2014.

Brent for February settlement increased 56 cents, or 0.5 percent, to $106.95 a barrel on the ICE Futures Europe exchange. Futures slipped as much as 59 cents, or 0.6 percent, to $105.80 earlier today, the lowest level since Nov. 12. Volume was 15 percent above the 100-day average.

The European benchmark crude’s premium to WTI dropped to as little as $12.81, the narrowest since Jan. 6.

U.S. Supplies

Crude stockpiles were forecast to drop 1.3 million barrels, according to the median estimate of 11 analysts surveyed by Bloomberg.

U.S. crude production increased 14,000 barrels a day to 8.16 million in the week ended Jan. 10, according to the EIA, the Energy Department’s statistical arm, the most since 1988. Output has surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations.

Crude supplies at Cushing, Oklahoma, the delivery point for WTI traded in New York, rose 145,000 barrels to 40.9 million, the report showed.

Fuel Inventories

Gasoline stockpiles gained 6.18 million barrels to 233.1 million last week. Inventories were projected to climb by 2.5 million barrels, according to the Bloomberg survey.

Supplies of distillate fuel, a category that includes heating oil and diesel, slid 1.02 million barrels to 124 million. A 1.25 million-barrel gain was forecast.

Refineries operated at 90 percent of capacity, down 2.3 percentage points from the prior week, according to the EIA. Utilization surged to 92.7 percent on Dec. 20, the highest level since July.

The Federal Reserve Bank of New York’s general economic index, which covers New York, northern New Jersey and southern Connecticut, rose to 12.5 in January, topping the 3.5 estimate in a Bloomberg survey. Readings greater than zero signal growth.

“The economic data this morning was positive, and that points to greater fuel demand,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.

The Washington-based World Bank sees the global economy expanding 3.2 percent this year, compared with a June projection of 3 percent and up from 2.4 percent in 2013. The forecast for the richest nations was raised to 2.2 percent from 2 percent, while the expectation for developing markets was cut to 5.3 percent from 5.6 percent.

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