MW: Oil prices drop as U.S. consumer confidence falls
Oil market awaits this week’s update on U.S. petroleum supplies
By Myra P. Saefong and Carla Mozee, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil futures dipped Tuesday ahead of the release of weekly crude inventory figures, with a fall in U.S. consumer confidence feeding concerns over energy-demand prospects and helping to push prices below $104 a barrel.
Crude oil for September delivery CLU3 -1.29% shed 99 cents, or 1%, to $103.56 a barrel on the New York Mercantile Exchange. Tracking the most-active contracts, prices haven’t closed below $104 since July 9, according to FactSet data.
The Conference Board Tuesday said the consumer confidence index fell in July to 80.3 from an upwardly revised 82.1 in June. The decline in the index was sharper than the 81.1 forecast of MarketWatch-polled economists.
Prices for oil fell further, from around $103.70, after the data were released, as the fall in consumer confidence raised the risk of weaker energy demand.
Data on U.S. home prices, meanwhile, were upbeat, showing an acceleration in May, with the S&P/Case-Shiller 20-city composite jumped 2.4% in May to take the year-on-year change to 12.2%
Still, overall, “crude oil has established a minor (short-term) downtrend as a result of investment traders taking money out of the market,” said Darin Newsom, senior analyst at DTN, a commodity-market research company.
“The run to $109 was seen as overvalued and an opportunity to pocket some gains, particularly with the end of the month fast approaching,” he said. Tracking the most-active contracts, prices closed above $108 on July 18, FactSet data show.
Futures prices on Monday fell 15 cents, or 0.1%, on worries about energy demand in China and in cautious moves before the U.S. Federal Reserve releases a policy statement Wednesday. The Fed’s two-day meeting starts Tuesday.
On tap
Late Tuesday, the American Petroleum Institute will release its data on weekly U.S. crude stocks, with inventory likely to have declined 3 million barrels during the week ended July 26, according to a survey of analysts conducted by Platts.
A more closely watched inventory report from the U.S. Energy Information Administration is due Wednesday.
U.S. crude oil stocks have fallen nearly 30 million barrels to 364.2 million barrels during the past four reporting periods, according to EIA data released last week.
“That said, crude oil stocks remain more than 5% above the EIA five-year average, even if that surplus has narrowed from around 11.5% during the same period,” said Platts.
News of the continued decline in oil inventory last week couldn’t offset the impact on oil prices from data highlighting concerns about economic slowing in China, the world’s second-largest oil consumer. Oil prices last week fell 3.1%, the first weekly pullback in five weeks.
More reports on Chinese manufacturing activity are due later this week.
Meanwhile, investors on Wednesday will search through the Fed’s statement for signs on when the central bank will start winding down the pace of monetary stimulus. The Fed has indicated it will reduce the size of its bond-buying program if the economy continues to improve. Many economists expect tapering to start in September.
The first estimate of second-quarter U.S. growth will also be released Wednesday, and along with other figures, “the Fed will have more complete data to determine if the economy is operating closer to its long-run potential,” said Wells Fargo Advisors chief macro strategist Gary Thayer to clients Monday.
“We continue to believe the Fed should only reduce its bond purchases if the economy is getting stronger and the recovery is self-sustaining at a healthy pace,” said Thayer. “But we may not be at that point yet, especially with global economic weakness.”
On ICE Futures Tuesday, September Brent crude UK:LCOU3 -0.40% fell 27 cents, or 0.3%, to $107.18 a barrel.
The September contract for natural gas NGU13 -0.78% shed 2 cents, or 0.6%, to $3.45 per million British thermal units.
August gasoline RBQ3 +0.40% rose 1.5 cents, or 0.5%, to $3.03 a gallon, and August heating oil was down a half cent to $3.01 a gallon. The August contracts for the oil products are set to expire at the close of Nymex trading on Wednesday.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
