Crude Settles Lower for First Time Since Feb. 12
Crude-oil futures settled lower for the first time since Feb. 12, after a build in U.S. crude and gasoline inventories pulled oil back from $100 a barrel.
Light, sweet crude for April delivery settled $1.47, or 1.5%, lower at $98.23 a barrel, in the contract's first day as the front month on the New York Mercantile Exchange. March futures had settled at $100.74, a record, in the contract's final day of trading. April Brent crude on the ICE futures exchange closed $2.19, or 2.2%, lower at $96.23 a barrel.
Crude oil reached as high as $100.33 in electronic trading overnight, but failed to enter triple digits once pit trading commenced. After hitting $99.94 shortly after 12 p.m. EST, the contract quickly plunged below $97, before recovering in the final hour of trading.
"I think this is the end of this push," said Mark Waggoner, president of Excel Futures in Huntington Beach, Calif. Waggoner believes that crude will fall back to a range of $92.60 to $94, as a staging ground for another rally.
The market at first appeared to shrug off U.S. Energy Information Administration data showing a 4.2-million-barrel rise in oil inventories last week. The gains topped analyst expectations, and marked the sixth straight week of increases.
Traders instead focused on potential supply threats that have fueled the rally over the last week, including unrest in Nigeria, the legal battle between Venezuela and Exxon Mobil Corp. (XOM) and a Texas refinery explosion. Recent interest rate cuts by the Federal Reserve also offered hope that a downturn in the U.S. economy would be less severe than expected.
"From a fundamentals standpoint, (Venezuela) really won't have that big of an impact, but it makes the market nervous," said Rick Mueller, director of the oil practice at Energy Security Analysis Inc. in Wakefield, Mass. "It's hard to justify."
Eventually the swelling oil stocks, along with a record 15th-straight increase in gasoline inventories, turned crude around just short of $100.
Reformulated gasoline blendstock, or RBOB, futures--the Nymex benchmark gasoline contract - saw greater losses than crude or heating oil futures.
Although distillates, which include heating oil and diesel, saw a larger-than-expected draw in the EIA data, their importance is waning. Gasoline, which sees peak demand during the summer, is likely to play an increasingly important role in determining prices. Inventories last week hit their highest level seen since February 1994.
"Gasoline may be the Achilles heel in this entire complex," said Phil Flynn, an analyst with Alaron Trading Corp. in Chicago. "That's where we're seeing demand destruction ... and supplies are high right now."
Front-month March reformulated gasoline blendstock, or RBOB, closed 6.32 cents, or 2.4%, lower at $2.5220 a gallon. March heating oil settled down 1.65 cents, or 0.6%, to $2.7381 a gallon.Copyright (c) 2008 Dow Jones & Company, Inc.