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Oil is rising today on a snap back from last week. But worries loom

Recs

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September 30, 2009 – Comments (0)

about supplies outstripping demand by a wide margin.

 

Crude Oil Falls a Second Day on Gains in U.S. Fuel Stockpiles

By Christian Schmollinger and Ben Sharples

Sept. 24 (Bloomberg) -- Crude oil declined for a second day in New York after a U.S. government report showed a larger-than- expected increase in fuel stockpiles in the world’s largest energy-consuming nation.

Gasoline stockpiles in the U.S. surged 5.4 million barrels last week, the Energy Department said. That’s more than the 500,000-barrel increase forecast in a Bloomberg News survey of analysts. Diesel and heating oil inventories jumped 2.9 million barrels, double what was expected. Crude oil supplies climbed 2.86 million barrels last week.

“The market has a glut of crude oil and refined products right now,” Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore, said in a Bloomberg Television interview. “If we get a big correction in equities, the loss of optimism in that demand recovery will continue to drive down prices.”

Crude oil for November delivery fell as much as 87 cents, or 1.3 percent, to $68.10 a barrel in electronic trading on the New York Mercantile Exchange. It was at $68.49 at 2:15 p.m. Singapore time. Yesterday, the contract dropped 3.9 percent to settle at $68.97. Prices have gained 54 percent since January.

Oil also dropped after the dollar rose against the euro, reducing the attractiveness of commodities as a hedge against inflation. The dollar traded at $1.4715 per euro at 1:17 p.m. in Singapore, from $1.4735 in yesterday New York. U.S. equities fell amid concern the Federal Reserve is nearing the end of its efforts to lift the economy out of recession.

“The inventory report showed a build in crude oil and petroleum, helping put pressure on oil to trade lower,” said Mike Sander, an investment adviser at Sander Capital in Seattle. “With equities closing at the low for the session, it pushed oil down even further in after-hours trading.”

Fuel Stockpiles

Crude oil inventories rose to 335.6 million barrels, the biggest increase since the week ended July 24, the Energy Department report showed. Analysts had expected a 1.4 million- barrel drop. The gain left stockpiles 9.1 percent above the five-year average. Imports climbed 10 percent to 9.79 million barrels a day, the highest since July.

“There are big concerns around the supply side,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. “We didn’t see much of a drawdown in gasoline supplies over the summer months in the U.S., and we continue to see these builds of distillate stocks ahead of winter.”

Stockpiles of distillate fuels climbed to 170.8 million barrels, the highest since January 1983, according to the department. Gasoline supplies jumped to 213.1 million, the biggest increase since January. That left stockpiles 6.5 percent above the five-year average for the period.

Counter-Seasonal

“The weakest part of the data was the large and counter- seasonal rise in gasoline inventories,” analysts at Barclays Capital, led by Paul Horsnell, said in a report.

Refineries operated at 85.6 percent of capacity last week, down 1.4 percentage points from the previous week, the Energy Department said. U.S. refiners often idle units for maintenance in September and October as gasoline demand drops and before heating oil use increases.

U.S. fuel consumption dropped 3.3 percent to 18.5 million barrels a day, the lowest since the week ended June 26. Gasoline use slipped 2.3 percent to 8.79 million barrels a day, the lowest since January.

Dollar Rebound

The dollar rebounded against the euro amid concern over how policy makers will approach the rapid appreciation of the 16- nation currency at a meeting of the Group of 20 nations today.

G-20 leaders, gathering in Pittsburgh, are attempting to pay off the $9 trillion tab governments ran up rescuing the world economy from the deepest financial slump in seven decades. They may warn the recovery is still too weak to start reversing lifelines to banks and the broader economy.

Most Asian equity markets fell, led by commodity companies after raw-material prices declined, mirroring yesterday’s decline on Wall Street. The MSCI Asia Pacific Index lost 0.3 percent to 118.38 as of 2:12 p.m. in Tokyo, where markets resumed trading after a three-day holiday. European stock futures were little changed.

Brent crude for November settlement dropped as much as 61 cents, or 0.9 percent, to $67.38 a barrel on the London-based ICE Futures Europe exchange. It was at $67.56 at 2:12 p.m. Singapore time. Yesterday, the contract fell 3.6 percent to end the session at $67.99, the lowest settlement in six days.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne bsharples@bloomberg.net

Last Updated: September 24, 2009 02:26 EDT

 

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