MW: Oil falls as U.S. inventories rise more than expected
Crude-oil futures widened losses Wednesday, tumbling more than 7% after government reports showed U.S. crude inventories rose more than expected and as data showed deteriorating troubles in the economy.
U.S. crude stockpiles gained 6.7 million barrels to 325.4 million in the week ended Jan. 2, the U.S. Energy Information Administration reported Wednesday. Analysts surveyed by energy information provider Platts had expected a buildup of 1.5 million barrels.
"The stock build should be enough to chase the bulls back into the barn," said James Williams, an economist at energy research firm WTRG Economics. "The substantial builds in crude oil, gasoline and distillates ought to bring the bears back from a short hibernation."
Crude for February delivery moved down $3.58, or 7.4%, to stand at $45 a barrel on the New York Mercantile Exchange. Oil was down 3.6% before the inventories data.
Oil had topped $50 on Tuesday for the first time in five weeks.
In Wednesday's report, the EIA also said gasoline inventories rose by 3.3 million barrels in the latest week, while distillate stocks rose by 1.8 million barrels.
Total petroleum products supplied over the last four-week period averaged 20.1 million barrels a day, down by 2.9% compared to the same period last year, the EIA reported. U.S. refineries operated at 84.6% of their capacity last week, up from last week's 82.5%.
Deepening troubles
On the economic front, data released earlier Wednesday indicated deepening troubles in the U.S., the world's biggest oil consumer. U.S. private-sector firms shed 693,000 jobs in December, far worse than expected, according to the ADP employment index compiled from a sampling of payrolls data. See Economic Report.
And for all of 2008, companies announced a total of 1.2 million job reductions, the most since 2003 and 59% more than in 2007, according to outplacement firm Challenger Gray & Christmas. See full story on job losses.
Also helping oil move lower was an easing of Middle East tensions, with reports of a temporary truce to fighting in the Gaza Strip and the announcement of an Egyptian proposal for a more permanent end to the conflict.
Israel agreed to halt its attacks in the Gaza Strip for three hours to enable the delivery of supplies to residents of the Hamas-ruled territory, prompting Hamas to declare a similar suspension on its rocket attacks against southern Israel.
Details were also reported over a cease-fire deal proposed by Egypt and France, even as Israeli media cited fierce fighting between Israel's ground forces and Hamas fighters. Wednesday marked the 12th day of Israel's effort to disable Hamas, and the fourth day of its ground operations.
On Tuesday, at least 40 Palestinians were killed when the Israeli military struck a United Nations school in Gaza. See full story on Israel-Gaza conflict.
Natural-gas spat
Meanwhile, exports of Russian natural gas headed to Europe through Ukraine came to a complete halt, escalating a stand-off between Moscow and Kiev just as temperatures are plunging across the region.
The two sides continued to blame each other for shortages that are starting to hit numerous European countries. See full story on Russian gas crisis.
With little in the way of backup fuels to draw on in the depth of winter, heating oil is seen as an alternative to Russian gas.
February heating oil futures closed at $1.6263 Tuesday, the highest in more than one month. It fell 3.5% to $1.5712 a gallon Wednesday.
Natural gas for February delivery was down 2.6% at $5.825 per million British thermal units. February reformulated gasoline slipped 5.8% to $1.12 a barrel.
