Singapore: Oil extended falls on Wednesday and eased slightly, pressured by a lower-than-expected drop in US inventories that capped a six-day rally in the previous session and outweighed good news from buoyant US home sales.
Pending US sales of previously owned homes shot up 6.7% in April, the biggest monthly gain in 7-years, driving equities higher and drumming up hopes of an economic recovery, but that was not enough to lift oil beyond the seven-month high of $69.05 it hit a day earlier.
Investors held back from building positions as they waited for data from the US Energy Information Administration due later in the day. The American Petroleum Institute said on Tuesday crude stocks fell 828,000 barrels last week, a smaller decline than 1.4 million barrels expected in Reuters poll.
“We will see a bit of consolidation happening after the current rally but it will remain in the higher ranges,” said Michelle Kwek, an analyst at Informa Global Markets. “The market is watching the stocks levels closely.”
US light, sweet crude was down 32 cents at $68.23 a barrel by 9:45am, off its earlier peak of $68.25. ICE Brent crude was down 37 cents at $67.80 a barrel.
Oil jumped 30% in May as expectations that the worst of the global economic crisis may be over lifted equities and commodities markets. But the market is still trading 54% below the record high of more than $147 hit in mid-July last year.
Opec Secretary-General Abdullah al-Badri said on Tuesday that oil prices could reach $80-$90 a barrel by early next year, but Opec would not increase its output until a huge amount of over-supply was absorbed.
Last week, Opec decided to keep production targets unchanged after agreeing a series of deep cuts in 2008 to stem a steep slide in crude oil prices from last July’s record highs.
The US Energy Information Administration will issue its own inventory data later today.
Gasoline supplies rose 99,000 barrels and distillate stocks jumped 3.4 million barrels, API said, against expectations for a 400,000 barrel build in gasoline and a 1 million barrel rise in distillate stocks.
US gasoline demand during the Memorial Day week, which ended on 29 May, rose 2.2% from a year earlier to 9 million barrels, a MasterCard SpendingPulse report showed on Tuesday.