Oil prices fell today after an industry report signalled petroleum inventories in top consumer the United States were headed for a record, following an unexpected sharp increase in crude stocks last week.
US crude for September delivery fell as much as 0.45 per cent to $75.43 a barrel, and was down 9 cents at $75.68 by 0515 GMT. ICE Brent for October fell 21 cents to $76.72, after flipping into a premium to the US benchmark yesterday.
Prices are now centred near the mid-point of this year's $64.24-$87.15 trading range, as recovering energy demand has been insufficient to drain ample supplies, leading to an unseasonal raft of seven consecutive weeks of gains in US gasoline stockpiles and eleven in distillate inventories, including diesel.
"It looks like the oil product market is very comfortably supplied and that demand conditions remain lacklustre," said Stefan Graber, a commodities analyst with Credit Suisse in Singapore.
"It will probably take a few weeks until we see decisive improvements."
The American Petroleum Institute late yesterday said US crude stockpiles rose by almost 5.9 million barrels last week, compared with analysts' expectations for a 1-million-barrel drop.
Gasoline stocks rose 2 million barrels, the API said, compared with forecasts for a 100,000 barrel decline, while distillates including diesel rose 2.1 million barrels, topping predictions for a 1.5 million barrel gain in a Reuters survey.
Supplies of gasoline normally fall over the summer as consumption peaks in the Northern Hemisphere. The unusual supply build-up sent futures prices of gasoline component RBOB on the New York Mercantile Exchange to their lowest in almost three months earlier this week.
If the API data is confirmed today by weekly government statistics on inventories and demand from the US Energy Information Administration, it would send the country's combined crude and product inventories to a record high.
Last week's EIA data showed combined crude and product stockpiles at 1.125 billion barrels - 3.5 million higher than at the same time last year and 2.1 million below the record high set back in 1990, when the US government started publishing the data.
An unusual premium of front-month Brent over US benchmark West Texas Intermediate (WTI) crude reached its widest level in two months yesterday on speculation that a glut at the Cushing, Oklahoma pricing point for WTI was expanding. It remained steady at slightly more than $1 a barrel today.
Crude supplies at Cushing stood at 37.7 million barrels in the week through August 6, just shy of a record 37.9 million barrels in mid-May, according to the EIA.
Oil prices have mostly hovered around the sweet spot for the Organization of the Petroleum Exporting Countries (Opec) in the $70-$80 range this year, after the group relaxed compliance with 2008 production cuts.
But the crude market has been rattled by the influence of currency and stock market fluctuations on an intraday basis as investors reduce or increase risk exposure, especially at the height of Europe's sovereign debt crisis in May, when prices reached both the highs and the lows for the year.
Prices were also under pressure from a stronger dollar today, which outdid the lift provided by rising Asian stock markets. The greenback gained about 0.16 per cent against a basket of currencies, after falling 0.4 per cent the previous day.
Japan's Nikkei average rose today, with exporters such as Canon gaining after strong US corporate earnings helped Wall Street rise a day earlier.
Encouraging industrial production data from the US also boosted US equities yesterday.
The US National Hurricane Center said late yesterday that a tropical wave over the central Caribbean Sea had a 10 per cent chance of developing into a tropical cyclone over the next 48 hours.
Reuters