Bloomberg: Crude Oil Rises on Slower-Than-Expected Recovery of U.S. Output: “Production losses caused by Hurricane Ivan prompted the U.S. government to agree to loan oil from the Strategic Petroleum Reserve, an emergency stockpile, to refiners. Shell Trading Co. U.S., a unit of Royal Dutch/Shell Group, will receive 1.4 million barrels of oil…” ShellNews.net)

Sept. 27 (Bloomberg) -- Crude oil futures rose for an eighth day in New York on concern U.S. inventories may decline as production in the Gulf of Mexico takes longer than expected to recover from Hurricane Ivan.

Crude oil for November delivery rose as high as $49.36 a barrel in after-hours electronic trading on the New York Mercantile Exchange, 4 cents below the record on Aug. 20. Oil traded at $49.20 a barrel at 2:49 p.m. Singapore time.

As of Friday, Hurricane Ivan had cut U.S. output by 10 million barrels in the Gulf of Mexico, which accounts for a quarter of the nation's production. High seas hampered imports via a terminal 20 miles off Louisiana's coast, helping to cut U.S. supplies close to a 29-year low in the week ended Sept. 17.

``Production is recovering far more slowly'' than expected, Deborah White, a Paris-based commodities economist at Societe Generale, said in a report. ``Ivan cost the oil complex time, and that time can never be made up.''

Production losses caused by Hurricane Ivan prompted the U.S. government to agree to loan oil from the Strategic Petroleum Reserve, an emergency stockpile, to refiners. Shell Trading Co. U.S., a unit of Royal Dutch/Shell Group, will receive 1.4 million barrels of oil and Placid Refining Co. LLC, which operates a refinery in Port Allen, Louisiana, will receive 300,000 barrels, Energy Department spokeswoman Jeanne Lopatto said last week.

The government last used oil from the reserve in October 2002 after Hurricane Lili, when it loaned 296,000 barrels to Shell to prevent an interruption of pipeline shipments. The oil that went to Shell after Lili was returned within 60 days.

Record Close

On Friday, November crude rose 42 cents, or 0.9 percent, to $48.88 a barrel, the highest closing price since futures began trading in 1983. New York oil futures, which began trading in 1983, reached a record intraday price of $49.40 on Aug. 20.

The November contract jumped 7.2 percent last week. Prices rose after a report showed U.S. crude-oil stockpiles fell for an eighth week, by 9.1 million barrels to 269.5 million in the week ended Sept. 17. Inventories are 5.8 million barrels from being the lowest since September 1975.

``I don't think we're going to see a build this week'' in inventories, said Randy Simpson, vice-president of supply and trading at New West Petroleum Inc. in Sacramento, California. ``With production being down and high demand we're going to see another draw,'' he said.

Gulf of Mexico production ended last week 28 percent below normal levels, according to the Minerals Management Service, part of the U.S. Interior Department.

High Winds, Seas

Prices also rose as high winds and seas from Hurricane Ivan returned to the Gulf, shutting the Louisiana Offshore Oil Port, the country's biggest import terminal, for a day and delaying efforts to re-activate some platforms.

U.S. crude oil supplies are at their lowest since the week ended Feb. 6. Supplies need to rise so that refiners can prepare stocks of heating oil during the fourth quarter, the biggest demand period in the U.S., New West's Simpson said.

``If we don't get some reasonable builds soon we're going to be through $50 in the blink of an eye,'' he said. ``We're at the end of September now. If the east coast starts getting cold early, forget about it.'' The U.S. northeast accounts for about 80 percent of U.S. heating oil consumption.

Heating oil for October delivery rose 0.85 cent, or 0.6 percent, to $1.3664 a gallon in after-hours trading. It closed at $1.3579 a gallon last week, the highest close for the front-month contract since trading started on Nymex in 1978.

Alabama

Hurricane Ivan made landfall near Gulf Shores, Alabama, on Sept. 16 as a Category 3 storm with sustained winds of 130 miles per hour. In the Gulf of Mexico, it destroyed seven oil and gas platforms that were anchored to the seafloor. As of Friday, it cut 43.3 billion cubic feet of natural gas production.

Concern over supply disruptions in Iraq, Russia and Venezuela helped push prices to a record in August. OAO Yukos Oil Co., Russia's biggest oil exporter, on Sept. 20 said cash shortages would force it to reduce exports by rail to China.

Disruptions from Hurricane Ivan have ``come at a time when the market cannot afford it,'' said David Thurtell, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``You only have to have something to go wrong with pipelines in southern Iraq or some bad news in OPEC nations or Russia and $50 will be blown away.''

Heating Oil

Crude oil may reach $50 a barrel as early as this week, according to a Bloomberg News survey of traders and analysts on Sept. 23. Twenty-four of 41 respondents, or 59 percent, predicted an increase in futures. Fourteen forecast a decline and three said prices would be little changed.

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures for the first time in five weeks, according to U.S. Commodity Futures Trading Commission data.

Net-long positions doubled to 13,544 contracts in the week ended Sept. 21, the Washington-based commission said last week.

To contact the reporter on this story:

Sri Jegarajah in Singapore at  sjegarajah@bloomberg.net.

Gavin Evans in Wellington, New Zealand at  gavinevans@bloomberg.net

To contact the editor responsible for this story:

Reinie Booysen at  rbooysen@bloomberg.net

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