Oil futures prices briefly topped $55 a barrel Wednesday after a report showed U.S. supplies of distillate fuel, which includes heating oil and diesel, shrank for a fifth straight week, heightening fears of a winter-fuels crunch.
The steady decline in commercial inventories of distillate comes as traders remain jittery about the strong global demand for — and limited supply of — crude oil.
After rising as high as $55.20 per barrel, crude for November delivery settled at $54.92 per barrel, up $1.63 on the New York Mercantile Exchange, reversing a two-day slide.
Crude futures are now 81 percent more expensive than a year ago, while the average residential price of heating oil is $1.99 per gallon nationwide, up 60.5 cents from a year ago, according to government statistics.
Crude would need to climb to $80 per barrel in order to reach the all-time pinnacle, in inflation-adjusted terms, set in February 1981.
Buying was triggered Wednesday by an Energy Department report showing a 1.9 million barrel drop in distillate fuel last week, bringing nationwide inventories to 119 million barrels, or 9.5 percent below year-ago levels.
The decline came amid falling imports of distillate and in spite of increased production from U.S. refiners, meaning domestic demand growth outstripped supply growth.
Daily distillate demand for the week ending Oct. 15 was 4.2 million barrels — a level that analysts said is more typical of the dead of winter. One explanation is that with prices high all summer many heating oil distributors delayed making their winter supply purchases, creating pent-up demand.
"This is the time of the year when you're usually building inventories," said Tom Bentz, a trader at BNP Paribas Futures in New York. "It seems we probably peaked on inventories a month or two early. The weather is getting colder, so it's unlikely that stocks are going to be able to build from here."
The Energy Department also reported that crude oil stocks grew by 1.2 million barrels to 279.4 million barrels, or 3.7 percent below last year.