Oil falls below $66 after inventories rise

Oil falls below $66 after inventories rise
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First Published: Wed, Jul 29 2009. 03 12 PM IST
Updated: Wed, Jul 29 2009. 03 12 PM IST
London: Oil fell below $66 a barrel on Wednesday after US data showed an unexpected rise in crude inventories and triggered a second day of selling.
US crude fell $1.56 to $65.67 a barrel by 3:00pm, after falling more than a dollar on Tuesday.
London Brent slid $1.23 to $68.65.
Traders were waiting to see whether government data for release at 8:00pm, would confirm industry figures published late on Tuesday, which showed a 4.1 million barrel increase in commercial crude stocks.
“The overall build of just over 4 million barrels is probably the main reason that we’ve fallen,” said Christopher Bellew of Bache Commodities in London.
Analysts had predicted data would show a decline in crude inventories following lower imports. They also expected increases in inventories of gasoline and distillates, which include diesel.
Demand during the US driving season has so far been insufficient to draw down high levels of inventory.
According to the American Petroleum Institute figures released late on Tuesday, crude stocks are 49.8 million barrels above levels a year ago.
Oil traders have been looking to equity markets for an indication of when the economy will recover and drive up demand for fuel.
Stock markets climbed to their highest levels this year on Tuesday following positive corporate earnings.
On Wednesday, a sell-off on Shanghai’s stock market depressed emerging market stocks, but European equities held firm.
Analysts have predicted commodity markets will continue to be strongly influenced by the stock markets for as long as economic recovery is in doubt.
In turn, too rapid a rally on commodities could knock equities lower as a potential threat to incipient economic recovery.
“Below $70 is probably a level equity markets can live with. When oil prices go too far above $70 that tends to dampen equity markets, and then that dampens oil prices,” Bellew said.
Oil markets hit this year’s high of above $73 a barrel at the end of June.
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First Published: Wed, Jul 29 2009. 03 12 PM IST
More Topics: Markets | Oil | Crude | Energy | Stocks |