(Bloomberg) - Oil fell to the lowest in three months in New York after U.S. producers increased drilling for a fourth week even as the market contends with abundant stockpiles.
West Texas Intermediate crude declined 2.4 percent. U.S. oil explorers have boosted the number of active rigs by 55 since the start of June to 371, with 14 added last week, Baker Hughes Inc. said Friday. Government data show U.S. gasoline supplies are at the highest seasonal level in decades, which may spur refiners to shut sooner than usual for maintenance. Oil also slipped as the dollar rose to an eight-week high, curbing investor appetite for commodities.
Crude has moved lower since reaching almost $52 a barrel in early June. Prices are still about 65 percent above February’s 12-year low as output disruptions added to speculation that the worst of the market rout is over. While the global oversupply has faded, high inventories of both crude oil and refined fuels coupled with signs of faltering demand growth have stifled the price recovery.
"It’s the last week of July and we’re looking at abundant gasoline supplies," said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $4.9 billion. "We’ll probably see an early rise in crude inventories as refinery operations are slowed. We’re not anticipating a return to the old lows but there’s room to the downside."
WTI for September delivery dropped $1.06 to settle at $43.13 a barrel on the New York Mercantile Exchange. It’s the lowest close since April 25. Total volume traded was 39 percent below the 100-day average at 2:35 p.m.
Brent for September settlement slipped 97 cents, or 2.1 percent, to $44.72 a barrel on the London-based ICE Futures Europe exchange. The North Sea crude ended the session at a $1.59 premium to WTI.
Oil rigs have been put back to work in seven of the past eight weeks in the U.S., according to Baker Hughes. U.S. crude production increased a second week through July 15, according to data from the Energy Information Administration.
The Bloomberg Dollar Spot Index, which tracks the currency against major peers, increased as much as 0.2 percent. A stronger greenback reduces the appeal of dollar-denominated raw materials to investors.
Futures in New York may extend declines after breaching support by closing below the 100-day moving average for the first time since April 4, according to Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida.
"Breaking below the 100-day moving average will probably bring in a lot of outside inventors, who will be shorting the market," Finlon said.
Money managers added the most bets in a year on lower WTI prices, Commodity Futures Trading Commission data show. Hedge funds’ net-long position fell by 23,665 futures and options combined to 156,804 in the week ended July 19, CFTC data showed. Shorts surged 24 percent.
U.S. gasoline stockpiles rose in four of the last five weekly reports from the EIA, sending supplies to the highest levels since April. Analysts surveyed by Bloomberg project that the EIA will report on Wednesday that inventories of the fuel increased 600,000 barrels last week, according to a Bloomberg survey.
August gasoline futures slipped 2 percent to $1.3336 a gallon, the lowest close since March 4. U.S. pump prices averaged $2.161 a gallon on Sunday, according to AAA, the lowest seasonal level since 2004.
Hedge funds and other money managers cut bullish bets on Brent crude by 5,763 contracts in the week ended July 19, according to data from ICE Futures Europe. The Movement for the Emancipation of the Niger Delta started talks with Nigeria’s government, even as another militant group claimed to have blown up a pipeline in the oil-rich region. Structural changes are required to keep North Sea oil competitive amid low crude prices, Royal Dutch Shell Plc said in statement before Wood Group workers strike on Tuesday.
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