Singapore: Oil fell from six-week highs to below $80 on Tuesday as forecasts for higher US crude and gasoline stockpiles offset concerns that a strike at Total’s French refineries would trigger fuel shortages.
US crude for April declined 43 cents to $79.88 a barrel by 8:35am, NYMEX March futures expired on Monday having touched $80.51, the highest intra-day price for a front-month contract since 13 January after six days of walkouts at the French refineries.
“The impact of the strikes will probably not be too big because refinery utilization is still low, so I assume that others will step in and increase their production if this is an issue that lasts longer,” said Stefan Graber, a commodities analyst with Credit Suisse in Singapore.
“We don’t see a lot of signs of an immediate pick-up in U.S. oil consumption, so we could see more rounds of increasing inventories.”
Crude inventories in the United States posted a fourth consecutive week of gains last week as imports grew, according to a Reuters poll, while gasoline supplies probably rose for a third week in a row.
London ICE Brent for April slid 46 cents to $78.15.
US crude inventories rose 1.9 million barrels and gasoline stockpiles added 500,000 barrels in the week ended 19 February, the survey showed.
“On the fundamental side, we really didn’t see a significant improvement that would warrant a move above $80,” Graber said. The recent price increase “has been more related to the fact that sentiment and risk appetite have improved a bit.”
Recent unusually cold weather probably drained US distillate stockpiles for a fourth consecutive week. Inventories in this category, which includes heating oil and diesel, fell by 1.9 million barrels, the poll showed.
“The cold spell seems to be over and this could mean that total oil consumption is not likely to pick up very strongly in the short term,” Graber added.
The industry group American Petroleum Institute will release its weekly inventory report on Tuesday at 2:00am, , while the federal Energy Information Administration will follow with weekly statistics on Wednesday 9:00pm.
Motorists rushed to the pumps in France on Monday after a union said the refinery workers’ strike would close more than half of France’s oil refining capacity.
Total said it would meet unions on Tuesday morning after talks collapsed late on Sunday.
Petroleum industry body UFIP said on Monday France had around 7 days of fuel supply left before it faced a shortage. The CGT union said output would grind to a halt at Total’s six refineries by Tuesday.
This will cut more than 1 million barrels-per-day (bpd) in French refinery capacity, of a total capacity of 2 million bpd, according to Reuters calculation.
Workers at Exxon’s two French refineries voted to join the action from Tuesday.