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 jerry.dicolo@dowjones.com
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