MW: Crude futures fall below $71 a barrel after strong rally
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Oil futures fell below $71 a barrel on Tuesday, giving up some of the previous session's strong gains, as falling stock-index futures and expectations of rising supplies soured sentiment in the energy markets.
Light sweet crude for September delivery fell $1.02, or 1.4%, to $70.57 a barrel in electronic trading on Globex.
Earlier, the contract hit an intraday high of $71.58 a barrel on Globex.
Stock-index futures pointed to a lower opening on Wall Street, as markets retrenched after crossing key technical levels and hitting multi-month peaks in the last session.
Traders also digested data showing that personal incomes of U.S. residents fell 1.3% in June, reversing the 1.3% gain in May that was due to a one-time stimulus payment to Social Security recipients.
Oil prices rallied 3% on Monday as upbeat data on global manufacturing activity spurred a rush into commodities and stocks. See full story.
"Given continuing poor oil fundamentals, current high prices seem difficult to sustain," said Nimit Khamar, analyst at Sucden Financial Research.
"With commodity prices once again rising, consumers may not be able to maintain their recent level of consumption amid wealth/ budgetary constraints, and therefore demand could continue to suffer and push oil prices lower," he wrote in a note to clients.
The American Petroleum Institute will release on Tuesday afternoon data on inventories for the week ended July 31. The Energy Information Administration will report its more closely watched data on supplies on Wednesday morning.
Analysts surveyed by Platts expect the data to show a rise of 1.5 million barrels in crude stocks and a decline of 2 million barrels in gasoline supplies. They also project a build of 1.1 million barrels in distillate stocks.
Refinery utilization is expected to drop another 0.5 percentage point to 84.1%.
Also on Globex, September reformulated gasoline fell 3 cents to $2.04 a gallon and September heating oil dropped 2 cents to $1.85 a gallon.
September natural-gas futures fell 13 cents, or 3%, to $3.91 per million British thermal units. The contract rallied 10.4% on Monday.
"The extreme volatility of the natural gas price is partly attributable to speculative investors," wrote analysts at Commerzbank in a note to clients. "Thanks to the abundant availability of natural gas and rumors that U.S. gas storage capacity could be reached by autumn, speculators have been betting on falling natural gas prices for quite some time."
