MW: Oil futures drop after U.S. supplies rise again
Crude supply up a 10th week: EIA; natgas stockpiles fall more than expected
By Myra P. Saefong and Barbara Kollmeyer, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil futures dropped Wednesday, poised for their lowest close in nearly six months after data from the U.S. government showed a 10th weekly rise in crude supplies.
Natural-gas futures, meanwhile, climbed by more than 1% on the back of a fall in U.S. stockpiles that was a bit more than expected.
Crude oil for January delivery CLF4 -1.88% sank $1.54, or 1.6%, to $92.14 a barrel on the New York Mercantile Exchange. Prices, which saw a 0.4% loss in Tuesday’s session, haven’t closed at levels this low since May 31, according to FactSet data tracking the most-active contracts.
“Prices on spot crude are at levels we haven’t seen in months and we feel this downward movement to the markets will continue,” said Tariq Zahir, managing member at Tyche Capital Advisors. “We wouldn’t be surprised to see crude get to the $90 level and breach those levels until we start seeing the annual destocking of crude oil by companies for tax reasons towards the latter part of December.”
The U.S. Energy Information Administration reported that crude supplies climbed by 3 million barrels for the week ended Nov. 22. Analysts polled by Platts expected a decline of 1.5 million barrels.
Late Tuesday, however, the American Petroleum Institute had reported a much bigger 6.9 million-barrel increase.
West Texas Intermediate crude-oil futures on Nymex broke through support at $92.50 early Wednesday, said Tyler Richey, an analyst for the 7:00’s Report, which offers daily markets commentary. “The move was mildly surprising but considering how thin volumes are with the holiday [Thursday], it makes sense to see such a weak support level broken.”
“We can expect quiet trading for the rest of the week but with inventory levels still above the five-year range and technicals being overwhelmingly bearish, the path of least resistance remains lower,” said Richey.
Trading on Nymex will be closed on Thursday for the Thanksgiving holiday. The exchange will hold an abbreviated session on Friday.
Analysts at Morgan Stanley offered a strong argument for a long-term downtrend in crude prices.
In a note dated Tuesday, they said oil prices will likely be “range bound” over the medium term as supply rebounds, but the “potential for global crude supply growth is greater than at any point in recent memory, leaving the outlook for oil prices skewed to the downside over the next few years.”
Gasoline supply on the rise
The EIA data Wednesday also showed that gasoline supplies rose by 1.8 million barrels, while distillate stockpiles fell 1.7 million barrels. Gasoline stockpiles were expected to rise 1 million barrels while distillate supplies, including heating oil, were seen down 1.3 million barrels, according to the Platts poll.
December gasoline RBZ3 -0.05% was down under a penny to $2.69 a gallon and December heating oil traded little changed at $3.04 a gallon.
