Singapore: Oil slid back below $69 a barrel on Wednesday, reversing a 2.6% gain the day before, after data showed a surge in US gasoline stocks, signalling weaker-than-expected demand from the world’s top energy user.
The market awaits confirmation of the American Petroleum Institute’s (API) bearish figures with the release of the US Energy Information Administration’s (EIA) own data later.
US economic figures due later will shed more light on the health of the US economy. May durable goods orders and new home sales figures could show the recession might be near a bottom, but a firm rebound is likely to be slow to emerge.
By 12:30PM, US crude for August delivery was down 38 cents at $68.86, off a morning low of $68.06, after settling at $69.24 on Tuesday. London Brent crude fell 43 cents to $68.37, off an early low of $67.58.
“We’re seeing potentially the third week in a row of increased gasoline stocks, which is a cautious sign, and would indicate that demand conditions are not that strong, and the US driving season is not panning out as expected,” said Mark Pervan, senior commodity strategist with ANZ Bank.
“Prices have run up very strongly, so there’s a natural pullback. Fundamentally, the market may be swinging towards focusing more on negative data which it has ignored in the last few weeks, and the API data could be the trigger,” he added.
Pervan expects crude to trade between $62 and $69 a barrel over the next week.
Weak dollar supports
Oil prices have more than doubled since last winter’s low $30s as investors have started to price in expectations for an economic recovery which should boost consumption.
API data on Tuesday showed US crude stocks fell 72,000 barrels last week, far less than expectations of a 1-million-barrel decline in a Reuters poll.
Gasoline stocks surged 3.7 million barrels against expectations of a 1.3-million-barrel increase, as refiners raised utilisation rates and product imports rose.
The Commerce Department will release U.S. May durable goods orders at 1230 GMT. Economists polled by Reuters expect a fall in orders of 0.6% versus a rise of 1.7% in April.
US new home sales for May are expected to rise to 360,000 annualised units versus 352,000 in April, a Reuters poll showed.
But oil is likely to be buoyed by a softer US dollar and supply disruptions from Opec member Nigeria.
The dollar hovered at its lowest levels for a week against the euro on Wednesday after tumbling sharply across the board, as the market braced for the Federal Reserve to dampen expectations for higher interest rates at the end of its meeting later.
Italian oil company ENI declared force majeure on shipments of Brass River crude oil from Nigeria, while Royal Dutch Shell said it was checking its oil operations in the Niger Delta after militants claimed they launched three attacks against its facilities at the weekend.
Kuwait’s oil minister said Opec would not cut output at its meeting in September. Kuwait was pleased with the strength of the oil price this month and was unconcerned by the recent fall, Sheikh Ahmad al-Abdullah al-Sabah told reporters.