MW: Oil trades near $40 with supply buildup foreseen
Oil futures were little changed near $40 a barrel early Tuesday ahead of data that's expected to show builds in U.S. crude supplies.
Crude for March delivery edged up 27 cents to $40.35 a barrel in electronic trading on Globex.
Technical support for oil prices is at $39.83, Monday's intraday low, according to Edward Meir, an analyst at MF Global. "Should we take that level out, we might set up a test of the old lows at $32.40, but even here we suspect that the next several dollars will likely be on the upside, as opposed to lower, particularly if gasoline recovers," Meir said.
Oil fell 3.8% in the Monday session as newly released U.S. data kept economic worries at the forefront. See Economy & Politics section.
Analysts expect a build of 2.9 million barrels in U.S. commercial crude-oil stocks in this week's oil inventory data from the U.S. Energy Information Administration and the American Petroleum Institute, according to a survey by Platts.
The API, a trade association for the U.S. oil and natural-gas industries, is due to release its data at 4:30 p.m. Eastern time Tuesday, while the EIA is to release its more closely watched data at 10:30 a.m. Wednesday.
Analysts project a build of 1.3 million barrels in gasoline stocks as a result of weak demand, while they expect a decline of 1.2 million barrels in distillate stocks because of strong demand for winter fuels amid uncommonly low temperatures across the United States, according to the Platts survey.
U.S. refinery utilization is expected to drop another 0.5 percentage point to 82% as maintenance season gets underway, the survey showed.
Last week, the EIA reported that U.S. crude stockpiles jumped 6.2 million barrels during the week ended Jan. 23 to reach 338.9 million barrels. That's the highest level the EIA has reported since August 2007.
"But the still-attractive contango in the front of the New York Mercantile Exchange crude oil futures curve will continue to provide the incentive to increase imports and store barrels," said Linda Rafield, Platts senior oil analyst, in a note. Contango is a situation whereby prices for nearby delivery are lower than prices for future-month delivery.
New York futures also trade at a discount to Brent crude, a European oil benchmark, because of excess supplies at Cushing, Okla., the delivery point for Nymex crude. Cushing inventories are currently at a record high of 33.5 million barrels.
Also on Globex Tuesday, March reformulated gasoline fell 1 cent to $1.14 a gallon, while March heating oil gained 1 cent to $1.35 a gallon. March natural gas futures rose 12 cents, or 35, to $4.67 per million British thermal units.
Joining many of its international peers, oil giant BP on Tuesday said it racked up a multibillion-dollar fourth-quarter loss as the oil-price dive eroded the value of inventories it had yet to sell.
BP said it swung to a $3.3 billion fourth-quarter loss, after earning $4.4 billion in the year-earlier quarter.
