MW: Oil futures extend losses as Chinese equities plunge
American Petroleum Institute reports big rise in crude supplies; EIA data ahead
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Oil futures fell more than 2%, extending their losses Wednesday after equities in Shanghai plunged and an industry group reported a surge in crude supplies.
Light sweet crude for September delivery fell $1.68, or 2.5%, to $65.56 a barrel in electronic trading on Globex.
Earlier, the contract hit an intraday low of $65.24 a barrel on Globex.
"Crude futures are lower after a sharp fall in Chinese equities," said Nimit Khamar, analyst at Sucden Financial Research.
"The largest fall in eight months sapped risk appetite and sparked concerns over the sustainability of markets at current levels, especially oil markets given the weak fundamental backdrop," he said in a note to clients.
The Shanghai Composite plunged as much as 7.7% on disappointing Chinese corporate profits and fears of possible central bank moves to tighten lending. The benchmark index closed down 5%. See Asia Markets.
On Wall Street, stocks also posted losses, with the S&P 500 index (SPX 973.59, -6.03, -0.62%) falling 0.9% to 970 points.
Additional pressure on oil prices came from the American Petroleum Institute's report that crude supplies increased by 4.1 million barrels for the week ended July 24.
Supply data ahead
Traders are awaiting separate data on inventories from the Energy Information Administration due at 10:30 a.m. Eastern.
Analysts surveyed by Platts expect a build in commercial crude stocks of 1.1 million barrels. They also project a decrease in gasoline stocks of 1.1 million barrels and a rise in distillate supplies of 1 million barrels. Refinery utilization is expected to slip 0.1 percentage points to 85.7%.
Oil prices fell on Tuesday after British oil giant BP (BP 49.84, -0.16, -0.32%) said there's little evidence of any growth in energy demand.
In Washington, the Commodity Futures Trading Commission started Wednesday its second of three hearings on energy trading.
Donald Casturo, a managing director at Goldman Sachs Group Inc. (GS 158.15, -2.39, -1.49%) , said that the role played in the energy markets by index investors and other financial participants "often has been mischaracterized."
Any steps to address concerns regarding non-traditional players in the energy markets "should be taken in an effective and non-disruptive manner," he said in prepared testimony before the CFTC.
Among others scheduled to testify Wednesday are Blythe Masters of J.P. Morgan Chase & Co. (JPM 37.99, -0.09, -0.23%) and Peter Krenkel of Natural Gas Exchange.
At the first hearing Tuesday, CFTC Chairman Gary Gensler said Tuesday that the futures-market regulator "must seriously consider setting strict position limits in the energy market." See full story on CFTC hearing.
Also on Globex, August reformulated gasoline fell 2 cents to $1.89 a gallon and August heating oil dropped 2 cents to $1.75 a gallon.
August natural gas futures fell 5 cents to $3.49 per million British thermal units. The contract expires at the end of trading today.
The EIA will report on Thursday data on natural gas supplies. IHS Global Insight is projecting a storage build of 72 billion cubic feet for the week ended July 24.
