US crude hits three-and-a-half years low below $99 on stocks build2 min read . Updated: 22 Oct 2013, 01:01 PM IST
Traders are betting on a near-term surplus of inventories in US, at least until refineries begin to rev up operations again
Singapore: US crude oil fell below $99 a barrel on Tuesday to its lowest level since early July after crude stockpiles rose more than expected in the world’s top oil consumer, pushing the discount to European Brent to its widest in six months.
Inventories at the Cushing, Oklahama, hub rose by 366,000 barrels to 32.99 million, after shedding 17 million barrels since 28 June as pipeline bottlenecks were eased, allowing for more movement of oil out of the hub.
Overall, oil inventories in the country rose by 4 million barrels to 374.5 million, more than the increase of 2.2 million barrels forecast in a Reuters poll of analysts.
US crude oil futures for November delivery, which expire at the end of trade on Tuesday, slipped 41 cents to $98.81, the lowest since 2 July.
However, Brent crude oil futures for December delivery were up 4 cents at $109.68 a barrel at 10:30 am. Brent increased its premium to US crude to as much as $10.44, the widest since late April.
Seasonal refinery maintenance and shifting pipeline flows around the Cushing oil hub helped reverse the long decline in stockpiles.
Traders are now betting on a near-term surplus of inventories in the US, at least until refineries begin to rev up operations again.
“There are a lot of stocks of crude oil in the US and all over the world and there is still a lot of uncertainty on a US economic recovery as there are several issues with the debt ceiling," said Ken Hasegawa, a commodity sales manager at Newedge Japan.
“Fundamentally the (US oil) market is not so strong but technically WTI could rebound today if the employment data is better than expected."
Investors were waiting for the US jobs data later in the day since that might provide clues on when the Federal Reserve could start to wind down its monetary stimulus.
“This surplus of oil supplies in the near term helped to weigh on prices but some support came from expectations that the US Fed would not reduce asset purchases," Phillip Futures analysts said in a note.
Brent crude was supported by a belief the Fed might delay curbing its monetary stimulus programme until next year, which would remove some of the worries about demand in the US economy and beyond.
Brent has also found support from lower global supply. Libyan output has fallen sharply and Nigerian output has been repeatedly hit by theft.
The US jobs data for September was delayed from 4 October by a partial US government shutdown caused by wrangling in Washington over fiscal matters including the debt ceiling.
Analysts polled by Reuters expected nonfarm payrolls to have increased by 180,000 in September after a rise of 169,000 jobs in August, with the jobless rate steady at 7.3%.
A senior Fed official said it would be “tough" for the Fed to have sufficient confidence in the strength of the US recovery by its meeting in December to start reducing its $85 billion-per-month bond-buying programme. Reuters