Oil slides for 2nd day on surprise US inventory gain

Oil slides for 2nd day on surprise US inventory gain

Singapore: Oil prices fell for a second day on Wednesday after an industry report showed unexpected gains in US crude and gasoline inventories, while weak US home sales data sent equities lower and dampened risk appetite.

US crude stockpiles rose 3.7 million barrels last week, the American Petroleum Institute (API) said on Tuesday, while gasoline supplies climbed 810,000 barrels.

Sales of existing homes in the US fell unexpectedly in May, a report showed on Tuesday, sending global stock markets lower.

Japan’s Nikkei average fell 1.6% on Wednesday as the positive impact of China’s yuan revaluation faded.

US crude for August delivery slid 29 cents to $77.56 a barrel at 8:07am, after the July contract expired on Thursday. Prices are little changed this week after a jump to almost $79 two days ago following China’s weekend decision to increase the flexibility of the yuan’s exchange rate.

ICE Brent for August fell 18 cents to $77.86.

“People continue profit taking after the API stockbuild," said Ken Hasegawa, a commodity derivatives manager at brokerage Newedge in Japan.

“If the stock market is going down, it is a factor to drive the crude market lower. Still we have to see the situation in Europe and the movement of the euro."

Investors also awaited Wednesday’s conclusion of a two-day US Federal Reserve’s Federal Open Market Committee meeting, with a statement due at 11:45pm, for signs that low interest rates will remain intact.

The oil market showed little reaction to the publication of the yuan’s trading range mid-point on Wednesday, even after the central bank of China set it slightly stronger than Tuesday’s close.

Government statistics on US oil inventories and demand from the Energy Information Administration will follow on Wednesday at 8:00pm.

US stockpiles of distillates including heating oil and diesel rose 1.1 million barrels last week, the API said, broadly in line with analyst forecasts.

MasterCard’s SpendingPulse report said US weekly retail gasoline demand rose 0.4% last week versus the previous week. But demand dropped 2.7% against the 2009 period and over the previous four weeks, demand was down 0.4% versus the same period in 2009.

A US judge blocked the Obama administration’s six-month ban on deepwater drilling imposed in the wake of BP Plc’s Gulf of Mexico oil spill.

The White House said it would appeal the judge’s ruling, issued in New Orleans after oil companies involved in offshore drilling operations challenged the moratorium.