Crude-oil futures settled Tuesday at a near-two-month low of $91.37 a barrel amid concerns over weak demand and rising inventories.
Prices shed early strong gains above $93 a barrel, as a jump in U.S. consumer confidence failed to hold buyers' interest in a market expecting another rise in already high U.S. oil inventories.
Crude hit its session low of $91.10 a barrel late in the final hour of trading after Federal Reserve Bank of Philadelphia President Charles Plosser expressed doubts that the Fed's new bond-buying program would stimulate economic recovery, and losses in equities deepened. Mr. Plosser, a longtime policy hawk, isn't a 2012 member of the Fed's policy-making board, but his comments played into market doubts about the prospects for economic recovery.
November-delivery crude oil futures prices on the New York Mercantile Exchanges settled 56 cents lower, at $91.37 a barrel. That is the lowest settlement price since Aug. 2, when front-month futures settled at $87.13 a barrel.
Some market players said a further drop in prices may be in the cards, perhaps revisiting the early August level. A drop to $87.13 "may be too low" in the near term, "but it's certainly not out of the question," said Tony Rosado, a broker at Dorado Energy.
November Brent crude on the InterContinental Exchange settled up 64 cents at $110.45 a barrel.
Data from the Conference Board that showed a sharp jump in U.S. consumer confidence in September, to the highest level since February. The September index registered 70.3, up from a revised 61.3 in August, causing crude to top $93 and swing on either side of that market for most of the morning.
"The data was good, it's supportive, but the market is burdened by other issues," mainly sluggish global oil demand, said Andy Lebow, senior vice president for energy futures at Jefferies Bache. "We're not just looking at one data point," he said, adding the outlook for global supply demand fundamentals "looks bearish" for the next two quarters, with current output from the Organization of Petroleum Exporting Countries exceeding demand forecast in that period.
A potential escalation of Middle East tensions could raise prices, but absent that, the market is searching for a bottom, he said. "The question is where is the floor--is it $90 or $87?," Mr. Lebow said.
Oil prices will take their near-term direction from U.S. oil inventory data due out at 10:30 a.m. EDT from the federal Energy Information Administration. Analysts surveyed by Dow Jones Newswires expect the figures to show crude oil stocks rose 1.1 million barrels in the week ended Sept. 21, while gasoline stocks increased by 200,000 barrels and distillates (diesel and heating oil) rose 700,000 barrels.
The American Petroleum Institute, a trade group, is set to issue its weekly inventory data at 4:30 p.m. Tuesday.
Gasoline stocks have dropped 6.5% in the past eight weeks to the lowest level since October 2008, while distillate stocks are 16.6% below the five-year average for this time of year, as demand remains weak. Crude-oil stocks are 11.8% above the five-year average.
November-delivery reformulated gasoline blendstock futures settled 4.95 cents higher at $2.9671 a gallon, the highest price since Sept. 14.
Heating oil for November delivery settled 0.99 cent higher at $3.1086 a gallon. Both contracts expire at Friday's settlement.
Copyright (c) 2012 Dow Jones & Company, Inc.
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