Wednesday, May 12, 2010

Crude Oil Declines in New York After U.S. Inventories Climb

By Mark Shenk

May 12 (Bloomberg) -- Crude oil fell in New York after a U.S. government report showed that inventories climbed for the 14th time in 15 weeks as refineries idled units.

Supplies of crude oil gained 1.95 million barrels to 362.5 million, the Energy Department said. Stockpiles at Cushing, Oklahoma, where the New York-traded West Texas Intermediate oil grade is stored, rose to a record. Refineries cut operating rates for the first time in eight weeks.

“There was another build at Cushing, which should put downward pressure on crude,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York.

Crude oil for June delivery fell $1.11, or 1.5 percent, to $75.26 a barrel at 11:34 a.m. on the New York Mercantile Exchange. Oil traded at $76.53 a barrel before the release of the supply report at 10:30 a.m. in Washington.

Brent crude oil for June settlement declined 2 cents to $80.47 on the London-based ICE Futures Europe exchange. Brent, usually cheaper than Nymex futures, is trading at a $5.21-a- barrel premium.

Inventories at Cushing increased 784,000 barrels to 37 million, the highest level since the department began reporting on supplies at the hub in April 2004.

Refineries operated at 88.4 percent of capacity, down 1.2 percentage points from the prior week and the first decline since March, the report showed.

Gasoline Stockpiles

Gasoline for June delivery climbed 0.81 cent, or 0.4 percent, to $2.2033 a gallon in New York. Futures touched $2.2345, the highest level since May 5.

Oil prices also dropped after the dollar rose against the euro, reducing the appeal of the raw material to investors. The dollar traded at $1.2646 per euro, up 0.2 percent from $1.2662 yesterday.

“The economy and the dollar have been the biggest movers of this market recently, not fundamentals,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “Eventually we will have to move on the fundamentals because there are plenty of barrels of both crude and products in storage.”

Reduced Demand Forecast

The International Energy Agency cut its estimate of world oil demand this year by 220,000 barrels to 86.4 million barrels a day in a monthly report.

The Organization of Petroleum Exporting Countries bolstered oil output by 40,000 barrels a day in April, according to the IEA. Supplies from the 11 members bound by quotas rose to 26.79 million barrels a day, 70,000 barrels a day more than in March. That means the group’s compliance with the record output cuts slipped to 54 percent last month. Iraq has no output target.

OPEC members will need to pump 28.7 million barrels a day to balance global oil demand and supply this year, according to the IEA. That is 400,000 barrels fewer than the Paris-based agency estimated last month.

Iran, holder of the world’s second-largest oil reserves, may be storing as much as 38 million barrels of crude at sea as demand declines for the heavier, sour grades the Persian Gulf country sells, according to the IEA.

--Editors: Joe Link, Richard Stubbe

To contact the reporter on this story: Mark Shenk in New York at

To contact the editor responsible for this story: Dan Stets at

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