BLBG: Oil Extends Decline As Inventories Reach Most Since 1990
By Mark Shenk - Jun 20, 2012 8:35 PM GMT+0530
Oil fell after the Energy Department said U.S. crude stockpiles rose to the highest level in almost 22 years and as investors awaited a Federal Reserve announcement on whether it will act to bolster the economy.
Futures dropped as much as 2 percent after the report showed supplies rose 2.86 million barrels to 387.3 million last week, the highest level since July 1990. Supplies were forecast to decline, according to analysts surveyed by Bloomberg. The Fed may announce more stimulus measures at the end of a two-day meeting this afternoon in Washington.
“We are down because inventories were plentiful even before today’s report,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in Chicago. “We will probably take out $80 in the next couple weeks.”
Crude oil for July delivery fell $1.63, or 1.9 percent, to $82.40 a barrel at 10:55 a.m. on the New York Mercantile Exchange. Oil traded at $83.02 before release of the inventory report at 10:30 a.m.
Brent oil for August settlement declined $1.26, or 1.3 percent, to $94.50 a barrel on the London-based ICE Futures Europe exchange. Futures ended yesterday’s session at $95.76, the lowest settlement since January 2011.
Crude stockpiles were forecast to decline 1.3 million barrels, according to the median of 11 analyst estimates in the Bloomberg survey.
Fed Decision
The Fed will probably decide today to expand Operation Twist beyond $400 billion to spur growth and buy protection against a deeper crisis in Europe, according to a Bloomberg News survey of economists. Fifty-eight percent of respondents in a June 18 poll said the Fed will prolong the program, which seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio.
“Nobody wants to stick their necks out until we see what the Fed is going to do,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “If the Fed doesn’t announce any new action, you will see markets sell off hard.”
Crude in New York has dropped 20 percent in the second quarter as Europe’s financial woes have raised concern about economic recovery and future energy demand. Brent crude has fallen 24 percent in the quarter.
Spain is scheduled to sell debt tomorrow maturing in 2014, 2015 and 2017. Yields on the nation’s 10-year government debt increased to 7.29 percent on June 18, the highest level since the euro was introduced in 1999. While yields eased yesterday, they remained above the 7 percent level that pushed Greece, Ireland and Portugal to seek rescue packages.
“The Brent market is very interesting,” Armstrong said. “We are trading near 17-month lows because of the weakness of the European economy.”
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
