Oct. 14 (Bloomberg) — Crude oil rose close to a record on concern that refiners will lack the supplies to meet demand for heating fuel during the northern hemisphere winter.

“There’s a distinct lack of availability of heating fuels in the U.S. and northwest Europe,” said Jack Kellet, a senior trader at Standard Bank in London. “That’s preventing speculators from selling and encouraging commercial players to buy.”

U.S. crude supplies last week probably were 5 percent below year-ago levels, a Bloomberg survey showed. Oil prices have fluctuated by almost $3 a barrel in the past two days after concern that rising energy costs will slow the global economy and oil demand growth halted a rally that drove prices to six straight records. The European Central Bank said today high prices could “dampen the strength” of economic recovery.

Crude oil for November delivery rose 24 cents to $53.88 a barrel in electronic trading on the New York Mercantile Exchange at 12:51 p.m. London time. It climbed above $54 earlier, the second session it breaches that level in 21 years of trading. Tuesday’s record was $54.45 a barrel. November Brent rose 15 cents to $50.20 on London’s International Petroleum Exchange.

“There’s been no earth-shattering data on the demand side to really cause a reversal in crude prices,” said Steve Turner, an analyst at Commerzbank Securities in London. “The underlying tone of the market is still firm.”

The International Energy Agency raised its forecast for demand growth to 3.4 percent for this year on Oct. 12. The Paris-based Agency lowered its forecast for demand growth next year by almost a fifth because high prices will slow the global economy and prompt some substitution of oil with alternative fuels.

Hurricane Ivan

Hurricane Ivan cut U.S. output to a 55-year low in September and forced refiners to slow processing. A U.S. Energy Department report today will probably show crude stockpiles rose by 900,000 barrels last week, according to the median estimate from a Bloomberg survey of 14 analysts.

New York crude has gained 66 percent this year on concern supplies would be disrupted in Iraq, Nigeria, Russia and Venezuela, as growth in China and the U.S. spurs demand. The Organization of Petroleum Exporting Countries, which pumps more than a third of the world’s oil, has boosted output to a 25-year high, leaving little margin to pump more.

OPEC will probably shelve plans to raise its oil price target as record-high oil costs threaten to damage growth in the world economy, two officials from the group said.

OPEC Price Target

An OPEC committee, which discussed the price target this week, recommended that ministers vote to keep the group’s $22 to $28 a barrel target at a Dec. 10 meeting while the matter is studied later, said the officials who attended the talks in Jeddah, Saudi Arabia, and declined to be identified by name. The group has failed to meet its target all year as energy demand surged.

“Keeping the same price band at the moment will help to lower the price,” said Maizar Rahman, Indonesia’s OPEC governor and the acting secretary-general at OPEC’s Vienna headquarters, by telephone from the Saudi city of Mecca. He wouldn’t comment on the panel’s recommendation.

U.S. supplies of distillate fuels, which include heating oil and diesel, probably fell 1 million barrels in the week, according to the survey. Inventories in last week’s report were 6.2 percent lower than a year earlier. Heating oil stockpiles were 11 percent lower than the average at this point in the past five years.

“The reality is that inventories are quite low and that there is very little spare production capacity in the system,” Commerzbank’s Turner said. “Several potential supply disruptions are waiting in the wings.”

U.S. Crude Supplies

The department’s report is scheduled for 10:30 a.m. Washington time. Crude oil supplies the week before were at 274 million barrels, down 4.3 percent from a year earlier, and 7.1 percent less than the average for the past five years.

U.S. output from the Gulf of Mexico declined 471,328 barrels from normal levels, the U.S. Minerals Management Service said yesterday. That level has barely changed this month as bad weather and shortages of diving vessels delayed repairs to damaged pipelines and platforms.

A third of the lost output could be restored by the end of October, the service said last week. It may take six months to get output back to 96 percent of pre-hurricane levels.

The U.S. pumped 4.85 million barrels a day last month, down 830,000 barrels, or 15 percent, from a year earlier, according to a monthly report by the American Petroleum Institute. That’s the lowest since August 1949, when the U.S. was the world’s largest oil producer and exported to Europe.

A long-term decline in U.S. production was compounded by the 500,000 barrels of production lost in the Gulf and through maintenance in Alaska.

Tight Supply

“The decline of more than 800,000 barrels in September was a lot more than we expected,” said George Gaspar, an energy analyst with Robert W. Baird & Co. in Milwaukee. “There is going to be a very tight supply situation going into the winter. The heating oil situation is disconcerting. Supplies are supposed to be rising during this period, which isn’t happening.”

OPEC President Purnomo Yusgiantoro urged all oil-producing countries to pump more oil to help ease prices, which have risen 18 of the past 21 sessions.

Hurricane Ivan and threats of rebel attacks on Nigerian oil facilities prompted speculators and hedge fund managers to increase their bets that oil prices would rise.

Net-long positions rose by 12 percent in the week ended Oct. 5 and have tripled since Sept. 17, according to U.S. Commodity Futures Trading Commission data.

To contact the reporter on this story:
Alejandro Barbajosa in London at [email protected].

To contact the editor responsible for this story:
Tim Coulter at [email protected]