Oil extends loss in wake of inventory data - Report
Published on Fri, 26 Jun 2015 63 times viewed
The Wall Street Journal reported that US oil prices edged back below USD 60 a barrel, extending losses for a 2nd day after government data showed a surprise increase in inventories of refined fuels such as gasoline.
The benchmark US oil contract, for August delivery, ended down 57 cents or 0.9%, at USD 59.70 a barrel on the New York Mercantile Exchange. The global Brent contract finished 29 cents or 0.5%, lower at USD 63.20 a barrel on the ICE Futures Europe exchange.
After rallying from multiyear lows earlier in the year, both contracts have been stuck in a tight range around USD 60 a barrel for much of the last two months and have pulled back from highs for the year set in May and June. While demand has been strong, supplies continue to mount in the US and around the world.
Mr Gene McGillian, senior analyst at futures brokerage Tradition Energy in Stamford, said that “Bullish investors are waiting for evidence of tightening fundamentals. We’re not seeing that. The rally has stalled because we haven’t seen any kind of production curtailment. The market seems to be running into a lot of headwind.”
Inventory data reported Wednesday by the US Energy Information Administration showed refineries ran at near-maximum capacity last week, drawing down on crude inventories by nearly 5 million barrels. But all the refinery activity resulted in an increase in fuel products, rather than a decrease as analysts projected.
Analysts are mixed on the outlook reflected in the data. While the increase was bearish, some said that it was the natural result of elevated refining activity and pointed to other data indicating strong gains in drivers’ fuel demand. But the agency’s estimate of US oil production edged up once again to more than 9.6 million barrels a day, showing the market remains well supplied with oil.
Analyst Dominick Chirichella of the Energy Management Institute said in a note that the market seems to be shifting from crude oil stockpiles into refined products inventory. Market sentiment remains mixed and slightly biased to the downside.
Globally, market watchers were focused on more potential bearish aspects for supplies, with the looming possibility of a nuclear deal with Iran that could eventually bring up to a million barrels of oil back onto the market.
Analysts also noted Chinese customs data showing a decline in crude imports in May. China has been a key source of support for the market, buying oil while it is cheap to add to its strategic and commercial reserves, and any evidence of weakening demand there would take away a rare source of market strength. Research consultancy JBC Energy said in a note that available storage space in China may be shrinking.
In refined fuel markets, gasoline futures fell 1.87 cents, or 0.9%, to USD 2.0368 a gallon, while diesel futures fell 1.38 cents, or 0.7%, to USD 1.8623 a gallon.
Source : The Wall Street Journal