Nymex Crude Falls; Bigger-Than-Expected Inventory

NEW YORK, Nov 7, 2007 (Dow Jones Newswires)

Crude oil futures ended slightly lower Wednesday, falling from an intraday record as the market weighed a smaller-than-expected fall in U.S. crude stockpiles and whether prices near $100 a barrel have risen too far, too fast.

Light, sweet crude oil for December delivery on the New York Mercantile Exchange settled 33 cents, or 0.3%, lower at $96.37 a barrel, after hitting an intraday record $98.62 before the release of key weekly U.S. inventory data by the Department of Energy. Prices had settled at a record $96.70 a barrel Tuesday. Brent crude on the ICE futures exchange fell 32 cents to $93.32 a barrel.

Traders said the heights to which crude, up 58% this year, has scaled have made the market jittery. This was evidenced by the exactly $4 a barrel trading range between the intraday low of $94.62 and the record high.

"When you get a big run-up to these sorts of untested levels, crude is vulnerable to big swings" when prices start running the other way, said Peter Donovan, vice president at Vantage Trading in New York. "The market is very aware we're trading at levels" that are hard to justify.

A slight rebound in the dollar, which fell to a new record low against the euro earlier Wednesday on suggestion China might want to dump some of the U.S. currency, also weighed on prices. Crude prices have run hard this year as the dollar declined, because the currency fall makes crude cheaper for traders using other denominations.

The closely watched inventory data failed to provide the fuel needed to push prices above $100 a barrel, a move many were waiting for, because the drop in crude stocks was lower than expectations.

"They were looking for a big, bullish report, so when the numbers came out (lower than expectations) there wasn't enough to push us higher," leading to profit-taking by funds and other speculators that had recently bet on price gains, said Daniel Beavers, a commodities broker at Alaron Trading Corp, in Chicago. "It doesn't look like we'll hit $100 this week."

Beavers said prices aren't likely to fall too far though, because stockpiles at the Cushing, Okla. delivery point for Nymex crude futures fell to a three-year low.

The fall in Cushing, where inventories have been a major driver of prices lately, and oil's slight sell-off, could also be indicative of too much speculative froth in the market.

"The fact that Cushing stocks fell 1.7 million barrels and the market wasn't rallying meant it was too long (already betting too hard on price gains) and possibly in need of a correction" lower, said Tom Bentz, an analyst at BNP Commodity Futures in New York.

U.S commercial crude stockpiles dropped 800,000 barrels to 311.9 million barrels last week, the DOE's Energy Information Administration said. That compared with an average forecast of a 1.6 million-barrel draw in a Dow Jones Newswires survey of analysts. Stockpiles at Cushing fell 1.65 million barrels to 13.4 million barrels, the lowest since Nov. 12, 2004.

Gasoline stockpiles fell 800,000 barrels to 194.3 million barrels, compared with an average survey estimate of a 200,000-barrel gain. Distillate stockpiles rose 100,000 barrels to 135.4 million barrels, compared with analysts' forecasts of a 500,000-barrel draw. Refining capacity was unchanged at 86.2%. Analysts had expected a 0.8 percentage point gain.

Front-month December reformulated gasoline blendstock, or RBOB, rose 56 points, or 0.2%, to $2.4406 a gallon. December heating oil rose 97 points, or 0.4%, to $2.6175 a gallon.

Copyright (c) 2007 Dow Jones & Company, Inc.