Crude Futures Slide in Late-Day Selloff
Oil futures fell in an intense sell-off during the last half-hour of trading Wednesday, after meandering most of the session.
Light, sweet crude for April delivery settled down $1.28, or 1.2%, at $105.43 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange fell $1.25, or 1%, to settle at $124.97 a barrel.
Crude futures chopped around in a narrow band for most of the day, mostly negative but turning slightly positive at times. But the market began a sharp drop at around 2 p.m. EDT and kept falling almost to the close.
Traders say there were no major headlines driving the market and attributed the move to technical-driven trades. The market "found some significant selling once it broke down late in the day," said Tom Bentz, director of BNP Paribas Prime Brokerage.
Traders and analysts are taking notice of oil's increasing dislocation from supply-and-demand fundamentals, questioning whether lofty prices can remain given growing inventories and weak U.S. demand. The U.S. Energy Information Administration reported a rise in crude stocks of 1.75 million barrels in its weekly inventory report Wednesday; analysts surveyed by Dow Jones anticipated an increase of 1 million barrels. Inventories at Cushing, Okla., the delivery point for the Nymex futures contract, were at the highest level since June 2011, and have risen 37% in the last two months.
"The fundamentals don't comply with the prices," said Tony Rosado, an oil broker at GA Global Markets. "Demand surely doesn't justify these prices. This market mystifies me."
Still, international oil monitors say the market remains tight. In its monthly report on the global oil portfolio, the International Energy Agency said oil markets face a "bumpy ride" because of current and anticipated supply disruptions amid shrinking spare production capacity in the Organization of Petroleum Exporting Countries, and tighter inventories in Europe and the Pacific.
The IEA left its 2012 demand projection unchanged from the month before, at 89.9 million barrels per day. It said OPEC supply rose by 315,000 barrels per day in February, led by a three-decade peak in Saudi Arabian output, and that non-OPEC supply rose at an annualized rate of 300,000 barrels per day.
Front-month April reformulated gasoline blendstock, or RBOB, settled down 0.76 cent at $3.3470 a gallon. April heating oil settled down 0.94 cent at $3.2618 a gallon.
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