Oil Drops to Two-Month Low Amid Ample US Supply, Rising Dollar
(Bloomberg) - Oil dropped to the lowest close in more than two months as the U.S. heads to the end of the summer-driving season with ample inventories.
Futures fell 1.3 percent in New York. U.S. crude and gasoline supplies are at the highest seasonal levels in at least two decades, government data show. Record June demand of the fuel wasn’t enough to make a dent in stockpiles that ended the month at the highest since 1984 for this time of year, the American Petroleum Institute said. The summer driving season ends Sept. 5 on Labor Day. Oil also slipped as the dollar rose to a more than seven-week high.
Oil has fluctuated between about $44 and $52 a barrel since early June after almost doubling from a 12-year low in February as supply disruptions from Nigeria to Canada and falling U.S. output trim a global surplus. While American crude stockpiles slid for a record ninth week through July 15, they still remain more than 100 million barrels above the five-year average.
"The bullish sentiment that pushed oil above $50 has evaporated," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. "We have massive crude inventories and more than ample fuel stockpiles as we near the end of the summer driving season."
West Texas Intermediate for September delivery fell 56 cents to settle at $44.19 a barrel on the New York Mercantile Exchange. It’s the lowest close since May 9. Prices declined 3.8 percent this week. Total volume traded was 35 percent below the 100-day average at 2:45 p.m.
Brent for September settlement dropped 1.1 percent to $45.69 a barrel on the London-based ICE Futures Europe exchange. Prices slipped 4 percent this week. The global benchmark closed at a $1.50 premium to WTI.
The Bloomberg Dollar Spot Index, which tracks the currency against major peers, increased as much as 0.5 percent. A stronger greenback reduces the appeal of dollar-denominated raw materials to investors.
U.S. crude inventories dropped by 2.34 million barrels last week to 519.5 million, the EIA reported Wednesday. Gasoline stockpiles rose to 241 million barrels, the highest level since April, as refineries bolstered operating rates to the highest this year.
"We’re going from a crude glut to a refined product glut," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. "Crude supplies have eroded for nine straight weeks but are still well ahead of where they were a year ago."
Rigs targeting crude in the U.S. rose by 14 to 371, marking the longest streak of increases since August, according to Baker Hughes Inc. data. U.S. June gasoline demand rose 2.7 percent from a year earlier to 9.64 million barrels a day, the API reported Thursday. Schlumberger Ltd. reported an unexpected loss for the second quarter and cut more jobs amid the slide in energy prices. Iran is in talks with Mitsui & Co. Ltd. and Total SA as part of its push to attract $60 billion in foreign investment to more than double the country’s capacity to produce petrochemicals over the next decade.
- With assistance from Grant Smith. To contact the reporter on this story: Mark Shenk in New York at firstname.lastname@example.org To contact the editors responsible for this story: David Marino at email@example.com Anne Riley, Carlos Caminada
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