Crude Oil Futures Settle 1% Lower at $94.21/Barrel

U.S. crude oil futures fell for a fourth straight Tuesday, shedding 1% to settle at a two-week low of $94.21 a barrel on worries over high inventory and sluggish demand.

Prices also were hit by strength in the dollar and signs of rising output from the Organization of the Petroleum Exporting Countries.

U.S. benchmark crude oil futures have shed 2.5% over the past four days, pressured by crude oil stocks that stand at their highest level since April 1981. The price skid, which trimmed $2.41 a barrel from front-month crude, is the longest since early January.

"We are swimming in crude and demand just isn't going anywhere," said Addison Armstrong, senior director of market research at Tradition Energy.

Light, sweet crude oil for June delivery on the New York Mercantile Exchange settled 96 cents lower, at $94.21 a barrel. The drop was the biggest since May 1 and put prices at the lowest level since May 2.

ICE North Sea Brent crude oil for June settled 22 cents lower, at $102.60 a barrel, the lowest price since May 1.

Analysts surveyed by Dow Jones Newswires expect upcoming weekly inventory reports to show U.S. crude oil stocks were unchanged last week at 395.5 million barrels, even as refiners increased operations by 0.5 percentage point to 87.5% of capacity. That would be the highest processing rate since January. Analysts also said they expect gasoline stocks are expected to drop by 700,000 barrels, while distillate stocks (diesel and heating oil), rise by 700,000 barrels.

Data from the American Petroleum Institute, a trade group, is due out at 4:30 p.m. EDT Tuesday, while the widely watched report from the federal Energy Information Administration is due at 10:30 a.m. EDT Thursday.

Oil prices have been soft in recent days on worries over slowing oil-demand growth, with forecasts for consumption in China, the world's second-biggest oil consumer, being pared. In the U.S., demand for gasoline in the peak driving season is projected to drop to a 12-year low, according to EIA. Gasoline is the most widely used petroleum product in the world's biggest oil consumer.

Meantime, the International Energy Agency said Tuesday that crude oil output from OPEC rose by 200,000 barrels a day in April, to 30.7 million barrels a day. That is 1.8 million barrels a day more than IEA says the world needs from OPEC and movements from inventories to cover demand in the current quarter.

The call on OPEC oil in the second half of 2013 of 30 million barrels a day is in line with OPEC's current output target, which is up for review when oil ministers meet on May 31 in Vienna. Iran, whose output is stunted by international sanctions, is urging OPEC to cut production to prop up oil prices.

"The IEA report was a little bit bearish, but I don't think this is much of a surprise to anybody," said Carl Larry, analyst at Oil Outlooks and Opinions.

In a medium-term outlook Tuesday, the IEA said surging oil output from U.S. shale oil fields is expected to climb by 2.3 million barrels a day between 2012 and 2018 exceeding OPEC output growth by 500,000 barrels a day in the period.

The IEA maintained its oil demand growth forecast for the year at 795,000 barrels a day, but highlighted that it expected demand in emerging and developing economies to overtake that in advanced economies for the first time this quarter. The U.S. EIA has for months projected that for all of 2013 demand in the developing nations will surpass oil use in the industrialized world.

Reformulated gasoline blendstock futures for June settled 1.66 cents higher, at $2.8376 a gallon, reflecting the expectation of declining stocks as Memorial Day, celebrated on May 27 this year, approaches. Oil marketers push fuel through the supply chain to stock filling stations ahead of the three-day holiday weekend which kicks off the summer driving season.

Nymex June heating oil, which trades as a proxy for diesel fuel, settled 1.80 cents lower, at $2.8730 a gallon. The prices was the lowest since May 2.

Copyright (c) 2012 Dow Jones & Company, Inc.


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Brent Crude Oil : $49.71/BBL 1.50%
Light Crude Oil : $48.7/BBL 2.05%
Natural Gas : $3.11/MMBtu 12.68%
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