MW: Oil falls below $92 after rise in crude supplies
By Myra P. Saefong and Sara Sjolin, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil futures fell below $92 a barrel Wednesday, pressured by a bigger-than-expected rise in last week’s U.S. crude inventories and an unexpected climb in gasoline supplies.
But Moody’s Investors Service’s decision to keep Spain’s sovereign rating out of junk status calmed nerves in the euro zone, contributing to a softer dollar. That provided some support for dollar-denominated commodities, such as oil.
Crude for November delivery CLX2 -0.28% fell 27 cents, or 0.3%, to $91.82 a barrel on the New York Mercantile Exchange.
Prices were trading around $92.64 shortly before the U.S. Energy Information Administration reported that crude supplies rose by 2.9 million barrels.
Analysts polled by Platts expected a 1.5 million-barrel increase in crude supplies. The American Petroleum Institute late Tuesday had posted a 3.7 million-barrel rise in last week’s inventories.
While U.S. “housing starts and building permits suggested recovery is taking shape in the world’s largest economy, crude-oil inventories suggested otherwise” — showing a bigger-than-expected build, said Fawad Razaqzada, technical analyst at GFT Markets, in a note.
Upbeat data on the economy tends to boost prospects for oil demand. The U.S. government on Wednesday reported that construction starts on new U.S. homes surged 15% in September, rising at the fastest pace in more than four years. See: U.S. home construction surges in September.
“The crude build last week was significant, partly reflecting low refinery operations,” said Michael Lynch, president of Strategic Energy & Economic Research in Massachusetts. “But the better demand picture for gasoline and ‘other oils’ (usually indicative of industrial usage) suggests that economic recovery could see higher demand use down the line, so the message is somewhat mixed.”
The EIA also reported that motor gasoline supplies added 1.7 million barrels, while distillate stocks, which include heating oil, fell 2.2 million barrels last week. Analysts were looking for a decline of 400,000 barrels for gasoline inventories and a drawdown of 1.5 million barrels in distillates, according to the Platts poll.
Following the supply data, gasoline and heating-oil futures fell even more.
November heating oil HOX2 -0.58% lost 3 cents, or 0.8%, to $3.17 a gallon and November gasoline RBX2 -2.10% declined by 7 cents, or 2.3% to $2.78 a gallon. Both were down about a penny before the supply report.
Natural gas for November delivery NGX12 +0.52% rose less than a cent, or 0.2%, to $3.44 per million British thermal units, ahead of a weekly EIA update on natural-gas supplies due out Thursday morning.
‘Bailout fever’
Early Wednesday, oil futures touched a high of $92.85 a barrel.
Oil was getting a boost because of what Phil Flynn, senior market analyst at Price Futures Group, called “bailout fever.”
“Even the ratings agencies won’t downgrade Spain because they know that Spain will ask for a bailout,” Flynn said, “so the euro is gapping higher supporting the commodity risk-on play.”
Moody’s late Tuesday affirmed Spain’s credit rating at Baa3, keeping it in investment-grade territory, but the credit-rating firm also assigned a negative outlook to the rating — a reminder that a downgrade is likely if conditions deteriorate. See: Moody's affirms Spain at Baa3 but outlook negative.
Spanish stocks and bonds rallied after the announcement, as market participants had feared Moody’s would lower Spain to below investment grade. The euro EURUSD +0.53% topped $1.31, as the ICE dollar index DXY -0.27% , which measures the greenback against a basket of other currencies, slipped to 79.036 from 79.371 late Tuesday. See: Euro hits one-month high as Moody’s affirms Spain.
Dollar-denominated commodities find support from a softer dollar, as they get cheaper for holders of other currencies.
Myra Saefong is a MarketWatch reporter based in San Francisco.
Sara Sjolin is a MarketWatch reporter, based in London.
