Crude Oil Futures Fluctuate as Dollar Strengthens, U.S. Inventories Climb

Crude oil traded little changed as a weakening dollar offset concerns that U.S. inventories are continuing to increase and credit-rating downgrades on Greece and Portugal may stall global fuel demand recovery.

A U.S. government report today may show crude-oil and gasoline stockpiles held by the world’s biggest energy consumer rose for a second week, according to a Bloomberg News survey. Yesterday the industry-funded American Petroleum Institute reported a 5.3 million barrel gain in crude supplies for the period, while MasterCard Inc. said gasoline demand was at its lowest level in 10 weeks.

“If the situation with Greece gets worse, probably $80 won’t stay as the floor,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “Demand won’t be too much affected, but the euro is, and sentiment is leading to higher risk aversion. It’s sentiment-driven.”

Oil for June delivery traded for $82.37 a barrel, 7 cents lower in electronic trading on the New York Mercantile Exchange. Brent crude oil for June settlement traded for $85.29, down 32 cents, on the London-based ICE Futures Europe exchange.

Crude pared earlier losses of 1.4 percent as the dollar weakened from a one-year high versus the euro, restoring the appeal of dollar-priced assets for hedging against inflation. It touched $81.29 a barrel, the lowest since April 19.

Based on the API data, the stockpile build is the ninth weekly gain, bringing inventories to the highest since May 2009.

Crude oil lost 2.1 percent in New York yesterday after Standard & Poor’s lowered Greece’s debt rating to junk and Portugal’s by two steps. Contracts on the Nymex are $3.35 a barrel cheaper than their equivalent in London, the widest discount since Aug. 17.

Low Volatility

Crude oil volatility is falling to the lowest level in almost three years as brimming stockpiles and rising OPEC investment in production capacity ease concern of shortages.

Oil’s 50-day historical volatility, a measure of how much crude fluctuates around its average price during that period, declined to 23 percent, the lowest since July 2007. The measure rose to a record 108 percent at the beginning of 2009 as prices collapsed following the demise of Lehman Brothers Holdings Inc. and the onset of global recession.

“Definitely, the build in crude stocks didn’t help, but if we go back to the second half of 2008, that sort of data would have caused prices to fall a lot more,” said Raiffseisen’s Loacker. “I’m not too bearish. The positive thing in the weekly data is the demand trend.”

An Energy Department report today will probably show inventories climbed 1.05 million barrels, according to the median estimate from 18 analysts polled by Bloomberg News. The department will release its data at 10:30 a.m. in Washington.

Inventory Build

Gasoline inventories probably gained 800,000 barrels from 224.9 million in the previous week, the survey showed. Supplies of distillate fuel, including heating oil and diesel, are expected to have risen 1.5 million barrels from 148.9 million. Refiners likely maintained operating rates at an average 85.9 percent of capacity after five weeks of increases.

U.S. gasoline demand dropped to the lowest level in 10 weeks with pump prices the highest since October 2008, MasterCard Inc. said.

Motorists bought an average 9.21 million barrels of gasoline a day in the week ended April 23, the second-biggest payments network company said in its SpendingPulse report. That was the lowest level since Feb. 12.

“Below $81 we will see some fresh buying,” said Ken Hasegawa, a commodity derivates sales manager at broker Newedge in Tokyo. “Everyone is still expecting the world economy will rebound.”

To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net

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