Tuesday, May 18, 2010
(Updates with API inventory data, market reaction.)
By David Bird
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A strong early rebound in crude oil futures prices faltered Tuesday, as equities prices sold off and the euro slid to a fresh session low against the dollar. The benchmark oil contract ended at its lowest level since Sept. 29, 2009.
Light, sweet crude oil futures for June delivery on the New York Mercantile Exchange settled down 67 cents, at $69.41 a barrel. Intraday, it hit a low of $68.91 a barrel. Early bargain-hunting popped crude to $72.52 a barrel, but it surrendered the gains on more relentless pressure from the strong dollar and continued concerns over bloated oil stockpiles. July crude, which takes over as front month after the June expiration on Thursday, settled down 62 cents at $72.70 a barrel. On the ICE, July North Sea Brent crude settled 67 cents lower, at $74.43 a barrel. That's the fourth-straight drop for front-month Brent, which settled at the lowest price since Feb. 15.
Front-month crude in New York has posted declines in 10 of the past 11 trading days. That's the longest skid since October 2003, when crude dropped for 13 of 14 days as the Organization of Petroleum Exporting Countries was struggling to trim output and support prices--then near $30 a barrel--in the face of expected higher Iraqi production. Traders said the market is again testing OPEC's tolerance for a price slide, which is partly rooted in higher-than-agreed output from the group. OPEC's overproduction is contributing to the rise in global inventories as supplies outpace demand.
OPEC has said it considers oil prices in a $70- to $80-a-barrel range to be an ideal level that provides funds for investment in future supplies and doesn't disrupt the global economic recovery. Angola's oil minister was quoted by the Portuguese news agency as saying the group could meet before its scheduled October meeting if prices made a new, unspecified "abrupt fall." Qatar's oil minister said in recent days that OPEC hadn't yet discussed the recent decline, and he reiterated support for $70-a-barrel oil.
U.S. oil inventories at the Cushing, Okla., delivery point for the Nymex contract stand at record levels, creating a glut that is weighing heavily on near-term prices. Analysts expect U.S. data due Tuesday from the American Petroleum Institute and Wednesday from the Energy Information Administration to show Cushing stocks rose further in the week ended May 14.
After the settlement, the API said crude oil stocks at Cushing rose 914,000 barrels in the week but, nationwide, crude oil stocks dropped 794,000 barrels. Analysts surveyed by Dow Jones Newswires had expected crude stocks to gain by 300,000 barrels nationwide.
June crude was down a modest 17 cents from the settlement, at $69.24 a barrel, after the API data.
The trade group also said gasoline stocks rose 981,000 barrels, against forecasts for a 500,000-barrel decline, and said distillate stocks (diesel/heating oil) fell 331,000 barrels, while analysts had expected a 1.2 million barrel rise. June gasoline futures, which had settled unchanged on Tuesday, were down 0.71 cent a gallon after the API data.
June crude has nosedived by nearly 21%, or more than $18 a barrel, since the start of the month amid the flood of supply. The contract hit an 18-month high of $87.15 a barrel on May 3.
Phil Flynn, an analyst at PFGBest in Chicago, said Tuesday's early rally was doomed to fail, given the lopsided supply-demand picture. Oil bulls "have been trying to shine a light on positive economic data as the reason to be blindingly bullish on oil."
But hints of economic recovery are being drowned by the high stockpiles. "We have not seen the evidence that demand can overtake the amount of massive oversupply," he said.
The peak U.S. summer driving season kicks off with the end-month Memorial Day holiday, but June reformulated gasoline futures prices on Tuesday fell to the lowest level since Feb. 18. After three days of losses, June gasoline settled unchanged at Monday's level of $2.0431 a gallon, which was the weakest settlement price since Feb. 25.
June-delivery heating oil futures prices settled down 2.37 cents, or 1.2%, at $1.9615 a gallon. Four days of declines, totalling 9.2%, or nearly 20 cents a gallon, left the price at the lowest level since Feb. 12.
More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:
Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close
-By David Bird, Dow Jones Newswires; 1-212-416-2141; david.bird@dowjones.com
(END) Dow Jones Newswires
May 18, 2010 16:49 ET (20:49 GMT)
