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Oil prices decline after jump in crude inventories

Oil prices decline after jump in crude inventories

The price of oil dipped back to the $113-a-barrel level Wednesday after the government reported a massive increase in the United States' crude stockpiles amid a slowdown in fuel demand.
The Energy Information Administration, an arm of the U.S. Energy Department, said crude inventories rose by a hefty 9.4 million barrels in the week ended Aug. 15, after a big gain in imports. The figure came in much higher than the average analyst forecast for a 1.7 million-barrel increase, according to energy information provider Platts.
U.S. fuel supplies are not abundant across the board _ gasoline inventories shrank by a larger-than-expected 6.2 million barrels to below-average levels, the EIA said. However, the decrease was not a major concern on Wednesday to traders, who have been focusing on weakening demand in the United States. Gasoline demand averaged about 9.5 million barrels per day over the last four weeks, or 1.6 percent lower than the same period last year, the EIA said.
Light, sweet crude for September delivery fell $1.43 to $113.10 a barrel in midday trading on the New York Mercantile Exchange, after rising above $116 a barrel in earlier trading. The September contract expires on Wednesday.
In London, October Brent crude fell $1.29 to $111.95 a barrel on the ICE Futures exchange.
The dollar rose against most currencies on Wednesday, giving traders an extra reason to exit commodities.
Few market watchers, however, were discounting the possibility of nervousness returning to the oil markets and bumping prices up again.
"Consumers can take some solace in the sell-off, but there are more supportive factors down the road here," said John Kilduff, senior vice president of risk management at MF Global LLC in New York.
Since mid-July, crude prices had pulled back by about $35, or nearly 25 percent, from their July 11 trading record of $147.27. The retreat arrived as the dollar recovered ground against other major currencies, and as evidence emerged that Western Europe's and Japan's economies are weakening alongside that of the United States _ which could put a damper on global energy demand.
But hurricane season is far from over, political conflicts overseas are keeping supply worries alive, and developing economies are still expected to boost their energy use in the coming years. Because of these factors, many analysts say the price of oil _ still more than 60 percent higher than a year ago _ appears to be consolidating at current levels.
One supportive factor for prices is the slim possibility of a trajectory change for Tropical Storm Fay, which hugged the Florida coast Wednesday morning. Fay has not approached oil and gas platforms in the Gulf of Mexico, but a couple computer models predict that the storm could bounce back toward the Gulf, according to a note from Addison Armstrong, an analyst at Tradition Energy.
MF Global's Kilduff and Peter Beutel of Cameron Hanover also pointed to thunderstorms in the eastern Atlantic that some traders are betting will develop into tropical storms.
Meanwhile, the conflict between Russia and Georgia persists. On Wednesday, Russia built a sentry post 30 miles outside the Georgian capital despite pledges to pull back to areas mandated by a cease-fire signed by both countries.
And with the Organization of Petroleum Exporting Countries meeting in early September, supply concerns could re-emerge if countries decide to lower their output in response to slower demand. Venezuelan Oil Minister Rafael Ramirez said he might propose an output cut at the next OPEC meeting.
In other Nymex trading, heating oil futures fell 2.4 cents to $3.1262 a gallon, while gasoline prices fell 2.9 cents to $2.8349 a gallon. Natural gas futures fell 2.9 cents to $7.947 per 1,000 cubic feet.


Updated : 2021-03-05 06:37 GMT+08:00