Crude Rise to $100 Stops as Refineries Cut Stocks

Oil supplies may come back to the U.S. Gulf Coast in January, sapping crude’s drive toward $100 a barrel, after stockpiles tumbled the most in 30 years this month as refiners sought to avoid year-end tax liabilities.

Supplies in states along the Gulf of Mexico, home to more than half of U.S. stockpiles, have fallen 9.2 percent this month to 167.3 million barrels, data from the Energy Department in Washington show. Oil settled at a two-year high of $91.51 a barrel on Dec. 23, bringing this year’s gain to 15 percent.

Accounting rules allow refiners to take a bigger 2010 tax deduction by cutting stockpiles that have jumped this year as prices increased. Gulf Coast supplies fell in 27 of the past 29 Decembers. They have risen in four of the past five Januaries.

Gulf Coast inventories were 4.1 percent above the Jan. 1 level in the week ended Dec. 17, down from 15 percent at the end of November. The decline so far this month is almost double the 4.8 percent average drop in the past five Decembers.

LIFO Accounting

Oil traded above $90 a barrel for three straight days last week as signs the U.S. economic recovery is gaining pace fanned optimism fuel demand will rise in 2011. Crude for February delivery climbed $1.03, or 1.1 percent on the New York Mercantile Exchange on Dec. 23. Oil last traded above $100 a barrel on Oct. 2, 2008.

Companies typically expense the cost of items they have sold from their taxable income. Many refiners use an accounting method known as “last in, first out,” or LIFO, which allows them to deduct the cost of the more-expensive crude they have purchased most recently and assert for tax purposes that the oil in their tanks was bought before at cheaper prices.