Analysts had expected weekly crude inventories to be unchanged
By Claudia Assis, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures remained lower Wednesday after the government’s weekly data on U.S. crude inventories showed an unexpected increase in supplies and traders were sidelined after the previous session’s rally.
Oil for November delivery CL1X -2.61% dropped $1.47, or 1.7%, to $82.96 a barrel in the New York Mercantile Exchange.
Losses deepened after the inventories report and as U.S. equities, seen as an indicator of economic activity and as such of oil demand as well, hovered near the flatline.
The contract on Tuesday rose 5.3% to its highest settlement in nearly a week, also notching its biggest one-day percentage gain in four months as investors cheered reports that euro-zone officials are planning to beef up their bailout fund to contain the region’s sovereign-debt crisis.
Earlier Wednesday, European Commission President Jose Manuel Barroso said he expects the European Central Bank to do whatever is necessary to ensure financial stability in the euro zone — a statement that played into Wall Street’s hopes for a gradual resolution of the sovereign-debt crisis.
After a couple of days’ of rallying, oil markets have settled down a bit with little to move them either way, said Tom Bentz, a director at BNP Paribas in New York.
Euro-zone sovereign-debt worries, despite the recent optimism, “are still cause for caution,” he said. “The markets are going nowhere.”
The Energy Information Administration’s inventory report was bearish, adding to the downward trend. The EIA reported an increase of 1.9 million barrels in oil supplies in the week ended Sept. 23.
The EIA also reported that gasoline supplies rose 800,000 barrels and that distillates increased 100,000 barrels on the week.
Analysts polled by Platts had expected oil inventories to be unchanged. They also had anticipated increases of 1.2 million barrels for gasoline inventories and 1 million barrels for distillates.
The trend of increasing inventories “will continue and accelerate in the upcoming weeks,” said Tariq Zahir, a managing member with Tyche Capital Advisors in New York.
October gasoline RB1V -0.82% rose less than a penny, or 0.1%, to trade at $2.70 a gallon. Heating oil for the same month’s delivery HO1V -0.80% held to gains, up less than 1 cent, or 0.2%, to $2.88 a gallon.
“Further support of the bearish case is the lack of hurricane activity or shutdowns in the Gulf of Mexico,” he said. “We feel crude will come under substantial pressure in upcoming weeks. Total demand is continuing to go down, coupled with the U.S. economy still on shaky ground and the U.S. jobs picture not looking any better anytime soon.”
Libya’s oil production making progress
Adding to pressure on oil market, Libya’s provisional government has made progress toward increasing oil production in the war-torn country.
Analysts at J.P. Morgan cautioned that reports on Libyan production may be basing their assumptions on potential rather than actual output.
Production is “slightly ahead” of the investment bank’s forecast calling for a production average of 300,000 barrels a day by December, thanks to better-than-expected progress in fields in eastern Libya.
“But production in the western basins remains restricted. The best indicator of production levels will be the restart of the big export refineries at Ras Lanuf and Zawiya and the rate of (oil tanker) loading,” the analysts said in a note.
Before the start of Libya’s rebellion against the regime of Col. Moammar Gadhafi, Libya produced about 1.6 million barrels of oil a day, and exported most of it to refineries in southern Europe.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
