Oil may return to Gulf Coast U.S. in January & rising the crude unit at $ 100 a barrel

Oil supplies may return to Gulf Coast U.S. in January, undermining the crude unit at $ 100 a barrel after the stock fell more than 30 years this month as refiners sought to avoid liabilities at fiscal year end.

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

"I suspect no more, $ 90 is sustainable beyond mid-January, because I think we will see some action builds" since 1 January, said Ken Medlock, an energy type in the James A. Baker III Institute for Public Policy at Rice University in Houston.

The accounting rules allow refiners to take a greater deduction fiscal 2010 by reducing reserves that have jumped this year prices went up. Gulf Coast supplies fell in 27 of the last 29 Decembers. Have increased in four of the last five Januarys.

Gulf Coast inventories were 4.1 percent above the January 1 in the week ended Dec. 17, down from 15 percent in late November. The decline so far this month is almost twice the drop of a 4.8 percent average in the last five Decembers.

"I expect to see more and continued based on early January and then see the barrels replaced later in January and February," said Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania.

LIFO Accounting

Oil traded above $ 90 a barrel for three consecutive days last week as signs of U.S. economic recovery is gaining pace fueled optimism fuel demand will increase in 2011.

Crude for February delivery fell 51 cents, or 0.6 percent to settle at $ 91 a barrel on the New York Mercantile Exchange. Touched $ 91.88 today, the highest since the October 7, 2008, on an intraday basis. Oil traded above $ 100 a barrel on October 2, 2008.

Companies often pay for the items that were sold from their taxable income. Many refiners to use an accounting method known as "last in, first out" or LIFO, allowing them to deduct the cost of more expensive crude oil has recently purchased and enforce tax purposes than oil in its tanks was purchased before at lower prices.

"We want to build large increases in the prices high, because what ends up happening is that it stays on its balance sheet," said Scott Rabinowitz, director of PwC's national tax services practice in Washington. "You're on your net income taxes, less spending bills. One of your expenses is the cost of the item you sold."

In recent years when prices rise, companies get a larger tax deduction through LIFO accounting if they get their supplies for their year-end inventories are approaching the levels at the beginning of the year.

Higher oil prices

"The higher oil price is going on in your storage system is the one down from the earlier books," said Doug MacIntyre, senior market analyst of oil in the Energy Information Administration in Washington, the statistical arm of the Department of Energy. "They're trying to get the crude oil so your system is not on the value price of oil."

LIFO accounting oil and gas companies benefited when oil reached U.S. $ 100 per barrel in 2007 and 2008. President Barack Obama proposed eliminating the budget announced in January 2009.

The accounting method has been used since the 1930's and is considered the most accurate measure of income for financial statement purposes, according to the Congressional Joint Committee on Taxation, a nonpartisan group in 2009.

Texas, Louisiana

Texas and Louisiana, two states with drilling rigs and refineries than any other, offering an extra incentive for oil companies to reduce their supply on hand, because firms are subject to local property taxes, based on fair market value of oil on January 1.

The two states are among the minority who impose property taxes on business inventories, according to the Tax Foundation, a nonpartisan policy center in Washington.

"If they are managing their businesses efficiently, they will pay attention to the amount of crude oil or distillate, or whatever it is in storage and try to reduce as much as possible," said Michael Cooper, a lawyer specializes in the areas of energy taxation with Haynes and Boone LLP, the largest law firm in Dallas.

U.S. imports Oil prices have fallen 22 percent since July to 8.74 million barrels per day in the week ended Dec. 17, based on Energy Department figures. They fell 15 percent in the seven days ended Dec. 10 to the lowest level since September 2008. Imports in the states of the Gulf of Mexico have declined 28 percent since July.

The drop in supplies

U.S. Total Inventories have dropped 19 million barrels this month to 340.7 million in the week ended Dec. 17, ready for the biggest monthly decline since December 2006. Inventories were 4.1 percent higher than at the beginning of the year, compared with 9.9 percent in late November, Energy Department data show.

"There may be some movement in stocks to adjust for these things, but there is more movement in the inventories of commercial reasons normal day to day," said Bill Day, a spokesman for the San Antonio-based Valero Energy Corp. most U.S. refinery. "There is more demand in the summer, so it can build inventories in the middle of the year and then draw inventories at the end of the year."