BW: Oil Pares Weekly Gain as Traders Lock in Profits on Equities
July 23 (Bloomberg) -- Crude oil declined in New York, paring gains for the week, as traders sold contracts to realize profits after prices rose to an 11-week high on optimism fuel demand will increase.
Oil is 4 percent higher this week as stocks rallied after EBay Inc. and Caterpillar Inc. earnings beat estimates. Asian equities rose today following the reports. Tropical Storm Bonnie may hit the coast of Louisiana by the afternoon of July 25, according to a notice from the National Hurricane Center.
“The strong earnings season and the strong correlation with the equities market has been the main driver for oil prices,” said Serene Lim, a commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore.
Crude for September delivery fell as much as 38 cents, or 0.5 percent, to $78.92 a barrel in electronic trading on the New York Mercantile Exchange. It was at $78.95 at 1:47 p.m. Singapore time. Yesterday, the contract rose $2.74, or 3.6 percent, to $79.30, the highest settlement since May 5 and the biggest increase since May 27. Futures are up 18 percent from a year ago.
The MSCI Asia Pacific Index gained 1.8 percent to 117.68 as of 1:40 p.m. in Tokyo, set for the biggest increase since June 21.
“Investors believe the global marketplace will make it out of the funk we are currently in and the markets will trade higher,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle.
Tropical Storm
Tropical Storm Bonnie formed south of the Bahamas and was on a track to take it across Florida and into the Gulf of Mexico, according to the U.S. National Hurricane Center.
The Gulf accounts for about 31 percent of U.S. oil output and 10 percent of its natural-gas production, according to the Energy Department. The coast along Louisiana and Texas is home to 42 percent of U.S. refining capacity.
Concerns of limited fuel demand pushed processing profits for refiners higher in the past three days. The margin from producing two barrels of gasoline and one of heating oil from three of crude climbed 5.8 percent since July 21.
The U.S. Energy Department said on July 21 U.S. crude stockpiles grew by 360,000 barrels last week. Gasoline inventories climbed 1.12 million barrels to 222.2 million barrels, the highest level since April.
Open Interest Drop
Brent crude for September settlement on the London-based ICE Futures Europe exchange fell as much as 32 cents, or 0.4 percent, to $77.50 a barrel. It was at $77.53 at 1:38 p.m. Singapore time. Yesterday, the contract jumped $2.45, or 3.3 percent, to $77.82, the highest settlement since June 25.
Investors exited the oil-futures market at the fastest pace since the collapse of Lehman Brothers Holdings Inc. amid evidence the global economic recovery is slowing.
Bets on West Texas Intermediate crude slumped 13.2 percent in the 60 days through July 20 to the lowest level since November, data from CME Group Inc.’s Nymex and ICE Futures Europe show. The last time open interest fell more was the 13.7 percent decline over the similar period through Oct. 7, 2008, three weeks after Lehman filed for the biggest bankruptcy in U.S. history.
Open interest in WTI futures fell to 1.80 million lots on the Nymex and the ICE exchange as of July 21 from 2.18 million on May 13. The lots include physically and financially settled contracts held by traders betting on prices rising and falling.
