BLBG: Crude Trades Near Lowest in Two Weeks as Gains on Gasoline Supplies Fade
Oil slipped to trade near its lowest in two weeks in New York on speculation that price gains from the biggest drop in U.S. gasoline supplies in 12 years may have been excessive.
Crude advanced 0.8 percent yesterday after the Energy Department said that gasoline stockpiles declined by 7 million barrels last week to 209.7 million, the biggest drop since Oct. 9, 1998. On April 12 the International Energy Agency reported signs of a “slowdown” in oil demand. The previous day the International Monetary Fund lowered its growth projections for the U.S., the largest consumer of crude.
“The recovery will continue in the U.S. but at a sluggish pace,” said Sintje Diek, an analyst at HSH Nordbank AG in Hamburg. “In the second half of the year we see a correction to more fundamentally based price levels.”
Crude for May delivery on the New York Mercantile Exchange fell as much as 69 cents to $106.42 a barrel, and was at $106.50 in electronic trading at 11:50 a.m. London time. Prices are up 24 percent from a year ago. Brent oil for May settlement traded at $122.23 a barrel, down 65 cents, on the ICE Futures Europe exchange in London. The contract, which expires today, rose $1.96, or 1.6 percent, to $122.88 yesterday. The more actively traded June contract was 65 cents lower at $121.68 a barrel.
The European benchmark traded at a premium of $15.73 a barrel to U.S. futures yesterday. The difference between front- month contracts in London and New York surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the delivery point for New York futures. The spread averaged 76 cents last year.
Kuwait Exports
Kuwait, OPEC’s fifth-biggest oil producer, resumed crude exports today after an improvement in weather, said Mohammed al- Ajmi, spokesman for state-refiner Kuwait National Petroleum Co. Port operations were suspended as a sandstorm covered the country for the third time in as many weeks.
Total U.S. crude inventories rose 1.63 million barrels to 359.3 million last week, the Energy Department said. They were forecast to increase 1 million barrels, the Bloomberg survey shows. Cushing supplies gained 26,000 barrels to 41.9 million, the highest level since at least 2004 when the department began tracking stockpiles at the hub.
“The numbers are supportive for gasoline, but crude inventories continue to increase,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney.
Demand Destruction
Gasoline consumption rose the most in more than five months, climbing 3.7 percent to 9.18 million barrels a day, the Energy Department report showed.
“Despite the positive demand signal, the market remained concerned over potential demand destruction due to rising retail gas prices,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in an e-mailed note today.
Refineries operated at 81.4 percent of capacity, down 3 percentage points from the prior week. It was the lowest level since February. A 0.45 percentage-point increase was forecast in the Bloomberg news survey.
Libya’s opposition said it is discussing with allies the possibility of borrowing $2 billion to import food, medicine, fuel and possibly weapons to combat Muammar Qaddafi’s forces. The Libyan conflict is the bloodiest in a wave of uprisings that has toppled leaders in Egypt and Tunisia and spread to Algeria, Bahrain, Iran, Oman, Syria and Yemen.
Syrian activists reported disruptions to phone, Internet and electricity connections in areas where protests have broken out, after authorities vowed to crush what they called a conspiracy against the regime.
Oil prices are likely to remain “high” as the impact on fuel demand from this year’s rally will probably be limited, according to Bank of America Merrill Lynch. Futures may exceed $140 a barrel in the next three months as consumption expands “rapidly” and armed conflict curbs supplies from Libya, according to the Merrill report dated April 12.
To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
