MW: Oil futures drop as data shows rise in crude supplies
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Oil futures fell Wednesday after the government reported a build in crude supplies at a key delivery point.
Crude for September delivery dropped 78 cents, or 1.1%, to $70.67 a barrel on the New York Mercantile Exchange.
The contract hit an intraday low of $69.71 a barrel on Globex after the Energy Information Administration said that crude supplies increased by 1.7 million barrels during the week ended July 31. Analysts surveyed by Platts expected a rise of 1.5 million barrels.
Crude oil inventories at the Nymex futures contract delivery point in Cushing, Okla., rose by 1.2 million barrels to 33.3 million barrels, the government said.
The EIA numbers were "bearish," especially the build at Cushing, said Tariq Zahir, managing member of Tyche Capital Advisors, LLC.
"There is a tug of war between the fundamental traders which clearly show weak demand and continue rising inventories, and the economic recovery and dollar weakness traders," Zahir said.
"If we see the equity market pull back a little and the jobs report coming out on Friday approaching the dreaded 10% number, we expect to see some profit-taking and the war to be won by the fundamental traders in the energy markets."
The EIA also said that gasoline stocks fell by 200,000 barrels and distillate inventories dropped by 1.1 million barrels last week.
Analysts polled by Platts expected a decline of 2 million barrels in gasoline supplies and a build of 1.1 million barrels in distillate stocks.
Economic data
Investors also digested mixed economic data.
U.S. non-manufacturing industries contracted for the tenth consecutive month in July, the Institute for Supply Management reported Wednesday. The ISM non-manufacturing index fell to 46.4 in July from 47 in June. Read more.
Separately, a report showed that the pace of U.S. job losses is moderating.
Private-sector jobs in the United States fell by an estimated 371,000 in July, the smallest decline since October, the ADP employment index showed Wednesday.
The ADP data comes ahead of Friday's government report on nonfarm payrolls, with economists surveyed by MarketWatch looking for a loss of 275,000 jobs, which would be the fewest since August.
In Washington, D.C., the Commodity Futures Trading Commission is holding the last of three hearings on commodities speculation on Wednesday.
Among those scheduled to testify is John Hyland, chief investment officer of U.S. Commodity Funds, the Alameda, Calif.-based fund manager that runs the $2.5 billion United States Oil Fund (USO 37.66, -0.31, -0.82%) and $4.5 billion United States Natural Gas Fund (UNG 14.10, +0.35, +2.55%) . Read more.
Also on Globex, September reformulated gasoline fell 3 cents to $2.02 a gallon, while September heating oil rose 1 cent to $1.91 a gallon.
September natural gas futures were up 7 cents to $4.07 per million British thermal units.
