U.S. crude futures fell Tuesday, snapping a four-session rally as investors paused ahead of weekly oil-inventory data and testimony from Federal Reserve Chairman Ben Bernanke Wednesday that could shed light on the central bank's stimulus plans.
Light, sweet crude for June delivery settled 55 cents, or 0.6%, lower at $96.16 a barrel on the New York Mercantile Exchange, falling from a seven-week high on Monday. The June contract expired at settlment Tuesday and the more heavily-traded July contract settled 98 cents lower at $95.95 a barrel. Brent crude on the ICE futures exchange fell 89 cents to $103.91 a barrel.
Analysts and traders across financial markets are awaiting Mr. Bernanke's appearance before Congress for signals on the Fed's economic outlook for the U.S., the world's largest consumer of oil.
Investors are also keeping close watch for any indications that the Fed is planning to end its monetary-stimulus program, which has helped to boost energy, commodity and equities markets. Any hint of a winding down of the program could lead to a selloff in crude oil.
"The market is so used to liquidity these days that people are scared about QE [quantitative easing] coming to an end," said Amrita Sen, an analyst at Energy Aspects.
The modest price decline in U.S. futures on Tuesday is set to end four straight sessions of gains that lifted crude to its highest price since early April. After falling to nearly $86 a barrel last month, oil prices have rallied amid improving data on the U.S. economy that many investors believe will lead to higher fuel demand.
"The market is getting tired," said Mark Waggonner, president of Excel Futures, who is betting on a price decline. He said that any signs of increasing fuel demand in weekly Energy Department data due Wednesday are likely to be temporary.
"It's nothing more than service stations filling their tanks ahead of the Memorial Day weekend," he said.
The U.S. Energy Information Administration is due to release weekly data on domestic oil and fuel stockpiles at 10:30 a.m. EDT Wednesday. Analysts expect U.S. crude-oil stockpiles fell by 600,000 barrels in the week ended May 17, according to a Dow Jones Newswires survey.
Stocks of gasoline are expected to fall by 100,000 barrels, while stocks of distillate, which include diesel and heating oil, are expected to increase by 700,000 barrels.
The market has largely shrugged off supply risks in recent weeks despite signs of increasing turmoil in the Middle East and an approaching U.S. hurricane season that could disrupt Gulf of Mexico oil production.
The American Petroleum Institute, an industry group, said its own survey released late Thursday showed crude stockpiles increased by 532,000 barrels. Gasoline stockpiles rose by 3.032 million barrels and stocks of distillate increased by 459,000 barrels.
Refinery runs fell to 86.8% from 88.3% in the week earlier period, the API said.
Front-month June reformulated gasoline blendstock, or RBOB, settled 6.76 cents lower at $2.8380 a gallon. June heating oil settled 2.83 cents lower at $2.9225 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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