Crude Settles Down After Inventory Increase
Crude-oil futures settled lower Wednesday after U.S. government data showed oil inventories rose unexpectedly last week.
Selling also was spurred by market participants' widespread belief that oil pipelines, drilling platforms and refineries in the key Gulf Coast region will restart quickly after Hurricane Isaac. Initial reports say the storm caused minimal damage.
But the market was more focused on news that crude stocks posted an unexpected rise of 3.778 million barrels last week. The data from the Energy Information Administration ran counter to expectations from analysts surveyed by Dow Jones Newswires, who anticipated a decline of 1.5 million barrels in crude-oil stocks in the week.
Part of the increase came from a jump of nearly 950,000 barrels a day of crude-oil imports into the Gulf region. Analysts said the increase may reflect some effort by refiners to bulk up on supplies before the initial shutdown of facilities began late last week.
October delivery crude-oil futures on the New York Mercantile Exchange settled 0.9%, or 84 cents, lower at $95.49 a barrel. On the Intercontinental Exchange, North Sea Brent crude oil for October delivery settled 4 cents lower, at $112.54 a barrel.
Gene McGillian, analyst at Tradition Energy, noted crude prices have been stuck in a $94-$98 range over the past two weeks, but after three-month highs at the top of the range, "the rally is stalling."
Analysts said prices could break higher if clear signs of a new economic stimulus move emerge from Federal Reserve Board Chairman Ben Bernanke's speech Friday to the Fed's annual economic symposium at Jackson Hole, Wyo.
The EIA data also showed gasoline stocks fell 1.5 million barrels, slightly more than the expected 1.2 million-barrel drop. Distillate stocks-diesel fuel and heating oil-rose 873,000 barrels, against expectations of a drop of 100,000 barrels.
While demand for gasoline was little changed in the week, at just above nine million barrels a day, it was 1.8% below that of a year earlier.
Late in the summer season, gasoline stocks dropped 0.7% in the week to the lowest level since May 25, the start of summer Memorial Day holiday time. Inventories are 3.6% below a year earlier.
Meanwhile, the market was quickly discounting the effect of Hurricane Isaac.
"Initial reports suggest there was little, if any, damage to offshore oil and gas platforms from Hurricane Isaac," said Tim Evans, analyst at Citi Futures Perspective. "Operations should begin returning to normal over the next few days."
However, several companies said they have to wait for conditions to clear before they could see if refineries had suffered power outages or flood damage.
Mr. Evans said he "sees potential for a secondary bullish market reaction if next week's inventory data show a larger-than-expected impact on inventories from the storm, but any fear or surprise element associated with the storm seems to have been lost."
Nearly 95% of oil output from the U.S. Gulf was shut down, government data released Wednesday showed.
Reformulated gasoline blendstock futures for September settled 2.58 cents lower at $3.1003 a gallon.
Heating-oil futures settled down 0.46 cent at $3.1157 a gallon. EIA reported demand for distillate fuel in the week was 12.8% below a year earlier, at 3.563 million barrels a day, a three-year low for the week.
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