By Mark Shenk
(Bloomberg) – Crude oil rose to a two-week high after a U.S. Energy Department report showed a larger-than- forecast drop in U.S. stockpiles.

Supplies fell 4.84 million barrels to 327.5 million last week, the biggest decline since September, the department said. Inventories were forecast to decrease by 1.6 million barrels, according to a Bloomberg News survey. Stockpiles of gasoline and distillate fuel, a category that includes heating oil and diesel, dropped as demand increased.

“These numbers took analysts by surprise,” said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. “We are now set to march up to the $80 level. It looks like the consumer is coming back even if the economic growth isn’t as strong as people wanted.”

Crude oil for February delivery rose $1.94, or 2.6 percent, to $76.34 a barrel at 12:04 p.m. on the New York Mercantile Exchange. Prices climbed as much as $2.29, or 3.1 percent, to $76.69, the highest since Dec. 4. Futures are up 71 percent this year.

Oil traded at $75.74 before the release of the report at 10:30 a.m. in Washington.

Traders are expecting reduced volumes during the final two weeks of the year as investors take holidays. Volume totaled 336,175 contracts on Dec. 21, the lowest since June 26 and 44 percent less than the average of the past three months. There will be no trading on Dec. 25 for Christmas and on Jan. 1 for New Year’s Day.

“This is the silly season for the oil market,” Brodrick said. “Volume is so light that it doesn’t take much to push the market around.”

Consumer Confidence

Confidence among U.S. consumers increased in December for the first time in three months as companies slowed the pace of job cuts and stocks advanced. The Reuters/University of Michigan final index of consumer sentiment rose to 72.5 from 67.4 in November. The figure was lower than the preliminary 73.4 reading, reported on Dec. 11.

Imports of crude fell 0.8 percent to 7.71 million barrels a day, the lowest since September 2008 when ports were shut because of hurricanes Gustav and Ike. Fuel imports slipped 8 percent to 2.42 million barrels a day, the lowest since October.

“The reason imports are at levels usually associated with major hurricanes is due to efforts by refiners to draw down excess stockpiles,” said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. “Inventories aren’t down because of a disruption in supply.”

Refineries operated at 80 percent of capacity last week, little changed from the prior week. Analysts surveyed by Bloomberg News forecast a 0.4 percentage-point gain.

Fuel Supplies

Gasoline stockpiles fell 883,000 barrels to 216.3 million, the first decline in five weeks, the report showed. A 1-million- barrel increase was forecast, according to the median of 16 analyst responses in the Bloomberg News survey.

Distillate supplies tumbled 3.03 million barrels to 161.3 million, the biggest drop since April. Analysts forecast a 2- million-barrel decline.

Gasoline demand averaged 9.05 million barrels a day in the week ended Dec. 18, up 0.9 percent from the prior week and 2 percent higher than a year earlier, the report showed. Consumption of distillate fuel averaged 3.99 million barrels last week, up 5.2 percent from the previous week and the highest since April.

Oil also advanced as the dollar dropped against the currencies of the U.S.’s biggest trading partners. A weaker greenback increases the appeal of commodities to investors.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against six currencies including the euro, yen and pound, fell 0.4 percent to 77.938, the first decline in seven days.

Brent crude oil for February settlement rose $1.59, or 2.2 percent, to $75.05 a barrel on the London-based ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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