Crude, Gasoline Fall As U.S. Stockpiles Rise
Crude-oil futures fell Wednesday, pulled lower by a 1.7% drop in gasoline futures, after government data showed a surge in fuel stockpiles that suggests production is outpacing demand.
U.S gasoline inventories rose by 7.9 million barrels last week, according to data from the Energy Department, the largest one-week increase in 11 years. Stocks of distillate, which includes heating oil and diesel, rose by 3 million barrels.
Rising inventories were accompanied by a 3.4% decline in domestic fuel usage, suggesting that production is more than meeting demand as consumers and businesses hold off on spending amid worries about the broader economy.
"The market is well supplied," said Andy Lipow, president of Lipow Oil Associates, an energy consultancy. "This trend is going to continue over the next couple weeks, and should put further pressure on gasoline prices."
Gasoline futures for January delivery fell 5.12 cents to a three-week low of $2.6378 a gallon on the New York Mercantile Exchange. The drop weighed on Nymex crude-oil prices, which settled 0.7% lower at $87.88 a barrel Wednesday.
Brent crude on the ICE futures exchange fell 0.9% to $108.81 a barrel.
After fuel-supply disruptions earlier this year in California and later in the Northeast following Hurricane Sandy, consumers and energy investors had grown concerned that oil refineries were having trouble producing enough fuel.
But refining facilities in the Midwest and along the Gulf Coast have begun dialing up their capacity to near record levels in recent weeks in order to take advantage of cheaper oil prices.
The increased activity, coupled with weak demand for gasoline, has weighed on prices at the pump. U.S. retail gasoline prices have fallen 9 cents from a month ago to $3.38 a gallon, according to AAA.
Analysts said that further increases in fuel stockpiles could weigh on oil prices as well. Wednesday's report sent oil futures toward the middle of a recent trading range between $85 and $90 that has bracketed crude prices since early November.
"This time of year, you need to look at the refined products for the short-term direction of the market," said Rich Ilczyszyn, a broker at II Trader in Chicago.
The data shifted traders' attention from broader economic concerns. Over the past week, negotiations between the White House and congressional Republicans about tax increases and budget cuts have kept investors in oil and other commodities on their toes.
Analysts at Standard Bank said investors "are firmly focused on the U.S. fiscal cliff negotiations," adding that "the lack of progress in finding a resolution" continues to weigh on markets.
Copyright (c) 2012 Dow Jones & Company, Inc.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
More from this Author
Most Popular Articles