Oil Falls to Three-Month Low Amid Projected Fuel Supply Growth

(Bloomberg) - Oil dropped to a three-month low in New York amid speculation that U.S. fuel stockpiles increased, bolstering a glut in the world’s biggest crude-consuming nation.

West Texas Intermediate oil fell 0.5 percent. U.S. gasoline supplies probably grew by 200,000 barrels last week, swelling stockpiles already at the highest seasonal level in at least two decades, according to a Bloomberg survey before a government report. Crude inventories, which are projected to have dropped a record 10th week, are also at the highest seasonal level in decades.

Crude has slipped more than 15 percent since early June after nearly doubling from a 12-year low in February as supply disruptions from Nigeria to Canada trimmed a worldwide surplus. BP Plc, the first oil major to report second-quarter results, missed analyst estimates as lower prices continued to erode income and refining margins shrank.

"Concerns about fuel inventories are weighing on the market," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. "We are looking for further growth in gasoline supplies and there’s still a lot of crude in the tanks."

WTI for September delivery dropped 21 cents to settle at $42.92 a barrel on the New York Mercantile Exchange. It’s the lowest close since April 25. Total volume traded was down 21 percent from the 100-day average at 2:49 p.m.

US Stockpiles

Brent for September settlement rose 15 cents to close at $44.87 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude ended the session at a $1.95 premium to WTI.

U.S. crude stockpiles were at 519.5 million barrels in the week ended July 15, more than 100 million barrels above the five-year average, according to data from the Energy Information Administration. Crude production increased for a second week to 8.49 million barrels a day as the nation’s drillers put rigs back to work. Last June, U.S. crude output reached 9.61 million barrels, the highest in more than 40 years.

"We’ll be keeping an eye on the U.S. crude production number," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "Production is down 1 million barrels from last year and we have to see if the increase in rigs is enough to have an impact."

Analysts project the EIA report will show that stockpiles of distillate fuel, a category that includes diesel and heating oil, climbed 900,000 barrels in the week ended July 22.

Oil-Market News

China National Petroleum Corp. said its Changqing field, the country’s biggest oil and gas producer, rebounded from losses earlier this year to post a first-half profit amid reduced spending. The reopening of two of Libya’s biggest oil ports may be delayed as the hardening positions of rival factions pose a fresh challenge to international efforts to reunite the country and restore its exports. Structural changes are required to keep the North Sea competitive amid low oil prices, Royal Dutch Shell Plc said before workers went on strike.

- With assistance from Grant Smith and Rachel Adams-Heard. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Anne Riley, Carlos Caminada

Copyright 2016 Bloomberg News.

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