BLBG: Oil Falls a Second Day as U.S. Supplies Grow More Than Forecast
By Grant Smith
April 8 (Bloomberg) -- Crude oil declined for a second day in New York after a report showed U.S. crude inventories increased more than forecast last week.
The U.S. Energy Department said yesterday that crude supplies rose 1.98 million barrels to 356.2 million last week. Stockpiles were expected to climb by 1.35 million barrels, according to a Bloomberg News analyst survey. Oil slid as the dollar strengthened against the euro for a fifth day, making commodities less appealing for hedging against inflation.
“We’ve seen a bit of a bubble in oil with no fundamental basis for prices of $80 to $90 a barrel,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “U.S. storage is at very high levels, so oil stocks could come for several weeks without a big effect on prices.”
Crude oil for May delivery dropped as much as 67 cents, or 0.8 percent, to $85.21 a barrel in electronic trading on the New York Mercantile Exchange. It traded for $85.38 at 11:08 a.m. London time. Brent crude oil for May settlement was down 58 cents at $85.01 on the London-based ICE Futures Europe exchange.
The U.S. currency was at $1.3307 to the euro at 11:08 a.m. in London, compared with $1.3344 yesterday in New York, amid concern Greece will default on its debt.
Yesterday, oil declined 1.1 percent in New York to settle at $85.88, dropping from an 18-month intraday high of $87.09 reached on April 6.
Supply Overhang
“Oil was getting a little bit frothy and probably out of line with where the fundamentals are at the moment,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “We had a rise in crude stocks, which is not an isolated incident. It does seem that the supply overhang in the U.S. isn’t being properly addressed.”
U.S. imports of crude oil last week gained 5.5 percent to 9.56 million barrels a day, the most since September, the Energy Department report showed. Fuel imports climbed 7.5 percent to 2.76 million barrels a day, the highest level since the week ended Feb. 5.
Stockpiles of distillate fuel, a category that includes heating oil and diesel, increased 1.07 million barrels to 145.7 million, the first gain in 10 weeks. A 1.13 million-barrel drop was forecast, according to the median of 14 responses by analysts in the Bloomberg News survey.
Gasoline supplies fell 2.5 million barrels to 222.4 million, the report showed. A 1 million-barrel decline was forecast.
Refineries operated at 84.5 percent of capacity, the highest rate since the week ended Oct. 2. The gain in refinery operating rates has coincided with a drop in the profit margin, or crack spread, for refining crude.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
