10/31 - Oil Hits New High Of $94 After Unexpected Drop In Inventories

[hatrack]

NEW YORK - Energy futures surged Wednesday to a new record of $94 a barrel after the government reported an unexpected drop in crude oil inventories for the second week in a row.

In its weekly inventory report, the Energy Department's Energy Information Administration said oil inventories fell by 3.9 million barrels last week. Analysts surveyed by Dow Jones Newswires, on average, had expected an increase of 100,000 barrels. Much of that decline was due to a big drop in crude supplies at a closely-watched oil terminal in the Midwest.

"The market is clearly reacting to the larger than expected 3.9 million barrel drop in crude oil inventories, including a stunning 3.1 million barrel drop at the Cushing, Okla., delivery point for the Nymex (crude) futures," wrote Tim Evans, an analyst at Citigroup Inc. in New York, in a research note.

Cushing supplies have been under pressure in recent months due to differences in the price between front-month oil contracts and those for delivery in future months. This price difference, or spread, has given storage tank owners a financial incentive to sell their oil, rather than hold it in inventory. Analysts have also blamed falling Cushing supplies, in part, for the rally in which oil prices have jumped 35 percent since August. "It's all about Cushing," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill., "That's going to just keep ... investment capital roaring into this market."

EDIT

http://news.yahoo.com/s/ap/20071031/ap_on_bi_ge/oil_prices_76;_ylt=AoKFzWT5_EHyGlY8pmI_nz.AsnsA

[phantom power]

1. I wonder how many "unexpected" drops in inventory these people will experience...

before they revise their predictive models, or otherwise adjust themselves to reality.