U.S. crude inventories have risen to the highest in 17 months, analysts project
Oil futures slumped more than 5% Tuesday, as newly released U.S. housing and consumer confidence data stirred more worries that a sluggish economy will cut into energy demand.
Also pushing oil lower, analysts expected U.S. crude inventories have risen for a fifth straight week to the highest level in 17 months. The American Petroleum Institute moved forward its weekly petroleum inventories report to Tuesday, one day ahead of the more closed watched U.S. government report.
Falling for a second day, crude oil for March delivery was last down $2.38, or 5.2%, to $43.35 a barrel on the New York Mercantile Exchange. In the previous session, it hit the highest level in nearly three weeks before closing lower.
"The weak housing and weak consumer confidence data are playing into the weak demand scenario," said Phil Flynn, vice president at Alaron Trading.
Home values in 20 major U.S. cities fell a record 18.2% in the 12 months ending in November, Standard & Poor's reported Tuesday. Prices are down 25% from the peak in mid-2006. See Economic Report.
Meanwhile, Consumer confidence in the U.S., the world's largest oil consumer in the world, hit a record low in January, according to the monthly Conference Board index reported Tuesday.
"Looking ahead, consumers remain quite pessimistic about the state of the economy and about their earnings," said Lynn Franco, director of the Conference Board's Consumer Research Center.
Also on Nymex Tuesday, March reformulated gasoline fell 3.31 cents, or 2.9%, to $1.12 a gallon and March heating oil dropped 4.16 cents, or 2.9%, to $1.3854 a gallon.
February natural-gas futures rose 3.2 cents, or 0.7%, to $4.522 per million British thermal units.
Most commodities posted losses Tuesday. Gold futures fell from a four-month high as a strengthening dollar and falling oil prices reduced the metal's investment appeal.
The Reuters/Jefferies CRB Index , a benchmark that gauges the prices of major commodities, fell 0.4%.
Inventories buildup
The API, an association of the U.S. oil and natural gas industry, will release its weekly report at 4:30 p.m. Eastern, while the report by the U.S. Energy Information Administration will still come out at 10:30 a.m. Eastern Wednesday.
Analysts surveyed by energy information provider Platts expect a 3.4 million barrel buildup in U.S. commercial crude stocks in the week ended Jan. 23. If realized, inventories would be the highest since August, 2007.
The same analysts also project an increase of 1.8 million barrels in gasoline stocks and a decline of 1.8 million barrels in distillate supplies.
Last week, the EIA reported that crude stockpiles at Cushing, Okla., the delivery point for crude futures traded on the Nymex, hit a new record high of 33.2 million barrels.
"A key feature remains any further manifestations of the weak demand which has plagued prices for months," wrote Brenda Sullivan, an analyst at Sucden Financial Research in a note. "For this reason, we believe crude oil prices remain vulnerable,"
Elsewhere, Venezuela's President Hugo Chavez said Monday the Organization of Petroleum Exporting Countries could further cut oil production to bolster oil prices, the Associated Press reported.
Chavez said that the OPEC oil cartel could reduce production by four million more barrels per day if it's necessary, according to the report.
Back in December, OPEC members agreed to reduce production by 2.2 million barrels a day starting in January. Tracking agency Petrologistics has reported that OPEC's oil output will fall by 1.55 million barrels per day in January.
