(Bloomberg) - Oil fell to a three-month low, edging closer to a bear market, after U.S. crude supplies unexpectedly rose from what was already the highest seasonal level in at least two decades.
Futures dropped 1.9 percent in New York. Crude inventories climbed for the first time since May last week as output rose, the Energy Information Administration said Wednesday. A Bloomberg survey had forecast a stockpile decline. Refineries cut processing volumes during the peak-demand summer driving season amid swelling gasoline supplies and weak profit margins.
"Gasoline stocks are high, which is weighing on prices and margins," said Michael Wittner, the New York-based head of oil-market research at Societe Generale SA. "Refinery crude demand is falling now for economic reasons and will only go lower as seasonal maintenance starts."
Oil is near the 20 percent drop from early June that would characterize a bear market. The recovery driven by supply disruptions that saw prices almost double from a 12-year low reached in February has petered out amid renewed concerns about the strength of demand. Oil producers including BP Plc, Royal Dutch Shell Plc and Total SA reported sharp declines in second-quarter earnings as lower crude prices continued to take their toll.
West Texas Intermediate for September delivery fell 78 cents to settle at $41.14 a barrel on the New York Mercantile Exchange. It’s the lowest close since April 19. Total volume traded was 24 percent below the 100-day average at 2:35 p.m.
Brent for September settlement, which expires Friday, fell 77 cents, or 1.8 percent, to $42.70 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close for a front-month futures contract since April 8. The more-active October contract dropped 68 cents to $43.23. September Brent closed at a $1.56 premium to WTI.
For a story on how prices are set and where they might be going, click here.
"We’re going to test support around $40," said Kyle Cooper, director of research at IAF Advisors and Ion Energy in Houston. "Crude inventories are building. There’s still more supply than demand."
U.S. crude stockpiles climbed by 1.67 million barrels to 521.1 million, the first gain in 10 weeks, the EIA report showed. Inventories at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, rose by 1.11 million barrels to 65.2 million.
Crude production in the U.S. rose by 21,000 barrels a day to 8.52 million last week, marking the longest series of gains since January.
Refineries reduced operating rates by 0.8 percentage point to 92.4 percent of capacity. Refiners typically bolster their operations in June and July to meet peak gasoline demand before ratcheting back in August. Over the past five years, refiners’ thirst for oil has dropped an average of 1.2 million barrels a day from July to October.
Gasoline stockpiles rose 452,000 barrels to 241.5 million in the week ended July 22. Production of the motor fuel and demand for it increased, EIA data show.
August gasoline futures slipped 1.2 percent to $1.3062 a gallon, the lowest close since March 3. Diesel for August delivery dropped 1.9 percent to $1.2704, the lowest settlement since April 19.
The slump in oil prices is temporary, Ed Morse, head of global commodity research at Citigroup Inc., said in an interview on Bloomberg television. Ample U.S. inventories and imports are weighing on prices now, he said.
View Full Article
Copyright 2016 Bloomberg News.
WHAT DO YOU THINK?
Click on the button below to add a comment.
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.
Most Popular Articles
From the Career Center
Jobs that may interest you