MW: Crude down 1% as stockpiles come in on the higher end
EIA data on petroleum inventories show larger-than-forecast increase for oil
By Polya Lesova & Claudia Assis, MarketWatch
SAN FRANCISCO (MarketWatch) -- Crude-oil futures headed toward snapping a six-session winning streak, falling Wednesday as a U.S. government agency reported a larger-than-expected increase in weekly inventories.
Crude for May delivery, the most active contract, dropped 88 cents to $85.97 a barrel on the New York Mercantile Exchange, deepening losses slightly following the report. It had earlier hit an intraday high of $87 a barrel.
The Energy Information Administration reported an increase in crude stockpiles of 2 million barrels in the week ended April 2, while analysts polled by Platts had been looking for an increase of 1.5 million barrels. It was the 10th consecutive increase in oil supplies.
The EIA also reported a decrease in gasoline inventories of 2.5 million barrels, while analysts had projected a decline of 1 million barrels. The agency reported an increase in distillates, which include heating oil and diesel, of 1.1 million barrels, while analysts had forecast a drop of 1.5 million barrels.
Energy traders had been anticipating that even a remotely bearish inventory report would send down prices sharply.
The report garnered particular interest since prices have gone up so much of late on expectations of an improvement in near-term demand, said Michael Lynch, president of Strategic Energy & Economic Research, Winchester, Mass.
Oil's contango -- a term that describes higher prices for further- out contracts than nearer contracts -- has "increased dramatically over the last two sessions and continue to go further," said Tariq Zahir, analyst with Tyche Capital Advisors in New York.
"The contango widening from 40 cents to 60 cents in a few days gives us the proof that the market is well supplied and we feel prices will head lower over the next few sessions," he added.
Crude for June delivery traded at $86.73 a barrel, the July contract traded at $87.42.
Demand driven
Oil prices ended slightly higher on Tuesday, enough to hit a fresh 17-month high. Since March 29, crude futures have finished every session with gains, buoyed by optimism about the global economy recovery -- and thus, prospects for an uptick in energy demand.
The rally in crude, "although still looking formidable on the charts, is getting long in the tooth, and due for a modest pullback," analysts at MF Global said in a report. Commodities "will have a hard time avoiding the 'blow-back' that a stronger dollar would generate," they added.
Also filtering into the action in crude, the dollar rose Wednesday, with the dollar index (DXY 81.60, +0.21, +0.26%) edging up to 81.62 from 81.379.
In a preview of the EIA report, the American Petroleum Institute said late Tuesday that crude supplies rose by 1.07 million barrels during the week ended April 2.
Gasoline stocks fell 2.9 million barrels, while distillate supplies rose by 723,000 barrels, the Washington-based industry group estimated.
Refinery utilization increased to 84.7% from 82.1% a week earlier, the API reported.
