Thursday, September 27, 2012

OIL FUTURES: Crude Drops After Release of US Inventory Data

By Jerry A. DiColo
NEW YORK--U.S. crude futures tumbled Wednesday despite a surprise decline in U.S. oil inventories as worries about fuel demand and Europe's debt crisis weighed on prices.
Light, sweet crude for November delivery recently traded $2.01, or 2.2%, lower at $89.36 a barrel on the New York Mercantile Exchange, after falling as low as $88.95/bbl following the inventory data.
Brent crude on the ICE futures exchange traded $1.76 lower at $108.69 a barrel.
The U.S. Energy Information Administration said crude-oil stockpiles fell by 2.4 million barrels in the week ended Sept. 21, surprising analysts that had called for a 1.1-million-barrel increase.
The stockpile drop was due primarily to a sharp decline in oil imports, which fell 7.6 million barrels, the lowest level since December.
But even as supplies fell, a measure of demand known as products supplied also dropped as refineries cut back on their utilization, suggesting that the oil-price drop is due to signs of sagging fuel usage.
"There's disappointment that refinery demand for inputs didn't perk up," said Tom Pawlicki, an energy analyst at brokerage EOXLive. "It may be that the refiners don't see demand picking up either."
Four-week demand for fuel products fell to the lowest level since April 6.
Weaker data on U.S. fuel usage comes amid continuing worries about Europe's debt crisis. Spain roiled markets following calls for early elections in Catalonia and a decision by the Spanish prime minister to restrict early-retirement programs.
Meanwhile, in Greece, unions began a general strike over austerity measures and street protests turned violent.
Andy Lipow, president of consulting firm Lipow Oil Associates, said the main focus of the oil market remains Europe, and the problems in Spain and Greece. But traders were cautious about betting on declines until after the U.S. inventory data were released.
"People might have felt when they came in this morning, it was already down a dollar, you might as well wait to see what the stats say," Mr. Lipow said.
Further weakness in Europe, where even stronger states are slipping toward recession, would likely put a dent in oil demand in the region.
After surging toward $100 a barrel earlier this month on optimism about new stimulus measures from the Federal Reserve, oil prices have slumped over the past two weeks as investors grow uneasy about slowing global growth and the situation in Europe.
Some market watchers are skeptical that central bank stimulus will forestall the latest slowdown.
"Any further slowing of economic growth and thus oil consumption will result in global inventories starting to move back toward the upper end of the normal inventory range," said Dominick Chirichella, analyst at the Energy Management Institute, in a client note. "If so, it could put pressure on oil prices."
Front-month October reformulated gasoline blendstock, or RBOB, recently traded 4.38 cents, or 1.5%, higher at $3.0109 a gallon, down from a high of $3.0206/gallon before the data.
October heating oil recently traded 3.81 cents lower at $3.0705 a gallon.
Write to Jerry A. DiColo at

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