BLBG:Oil Drops From One-Week High in New York on Rising U.S. Supplies
Oil dropped from the highest close in more than a week in New York as investors bet that rising U.S. stockpiles signal fuel demand may falter in the world’s biggest crude-consuming nation.
Futures slipped as much as 0.6 percent, declining for the first day in four. Crude supplies rose 3.6 million barrels last week, the American Petroleum Institute said. A government report today may show inventories gained 2.6 million barrels, according to a Bloomberg News survey. U.S. gasoline demand fell 1.5 percent last week, according to MasterCard Inc. (MA) Prices also slid after the U.S. said it’s considering releasing oil from its Strategic Petroleum Reserve and the Wall Street Journal reported Iran will resume talks on its nuclear program.
“We’re at that level where we will need fresh impetus in terms of ongoing improvement in the demand outlook to take us above here,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney who sees technical resistance for West Texas crude at $108 a barrel. Inventory data “provides some insight into the state of the supply, demand balance in the U.S., particularly as we approach the driving season,” he said.
Oil for May delivery fell as much as 69 cents to $106.64 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.75 at 1:20 p.m. Singapore time. It gained 30 cents yesterday to $107.33, the highest close since March 19. Prices are 8 percent higher this year and headed for a second consecutive quarterly gain.
Goldman Recommendation
Brent oil for May settlement slid 57 cents to $124.97 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded West Texas Intermediate was at $18.24, compared with $18.21 yesterday.
The Brent-WTI spread is set to narrow with the reversal of the Seaway pipeline, which will alleviate a glut of oil in the U.S. Midwest by pumping it to refineries on the Gulf Coast, according to a report published today by Goldman Sachs Group Inc. (GS) The price for the U.S. benchmark will rise and the discount to the London-traded grade will narrow, the bank said, reiterating its recommendation to buy September WTI futures.
U.S. gasoline consumption slipped below year-earlier levels for the 30th consecutive week, MasterCard’s SpendingPulse report showed yesterday. The average pump price rose 4 cents in the past week to $3.88 a gallon, the highest price since May 20.
Gasoline Inventories
Stockpiles of the motor fuel rose 1.3 million barrels, the data from the industry-funded API showed. They are estimated to fall 1.6 million barrels in today’s Energy Department report, according to the median of 12 analyst estimates in the Bloomberg News survey. Distillate inventories, a category that includes heating oil and diesel, slipped 1.4 million barrels compared with a forecast for a 500,000 barrel decline.
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
The release of oil from the Strategic Petroleum Reserve “has been in consideration for some time,” Charles McConnell, acting assistant secretary for fossil energy, said at a hearing in Washington yesterday. No decision has been made, he said.
The Obama administration is studying a release from the reserves as it monitors rising gasoline prices and political turmoil in the Middle East, Energy Secretary Steven Chu and Interior Secretary Ken Salazar said separately on Feb. 28.
`Bearish for Sentiment'
Iran will meet with representatives from the U.S. and five other countries for talks over its nuclear program on April 14 in Istanbul, the first such negotiations in almost 15 months, the Wall Street Journal reported, citing a senior European Union diplomat who it did not identify.
“It may be bearish for sentiment, but not for fundamentals,” Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong, said about the report of Iran talks. “I think tightening effects of sanctions will continue, and maybe there would be even less willingness to ease or slow the build in pressures ahead of any meeting if this can help encourage any quick and real compromise by Iran.”
Crude prices have risen this year on concern that Western sanctions aimed at halting the program will disrupt Middle east supplies. Iran has threatened to shut the Strait of Hormuz, a transit route for a fifth of the wrold’s oil, in response to an embargo.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
