Crude Oil Falls After Report Shows Surprise Gain in U.S. Gasoline Supplies

Crude oil fell, capping the first quarterly decline since 2008, after a government report showed an unexpected increase in U.S. gasoline stockpiles.

Gasoline inventories rose 537,000 barrels to 218.1 million last week, the Energy Department said. Supplies of distillate fuel, a category that includes heating oil and diesel, climbed the most in two months, as crude oil fell 2.01 million barrels.

“This report is net bearish,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “When we see product inventories growing, the consumer can feel more secure because the risk of a refinery disruption is reduced. Who cares if we are short crude if there is plenty of fuel on hand?”

Crude oil for August delivery dropped 31 cents, or 0.4 percent, to $75.63 a barrel on the New York Mercantile Exchange, the lowest settlement since June 14. Futures fell 9.7 percent for the quarter and 4.7 percent this year.

Gasoline for July delivery slipped 1.14 cents, or 0.6 percent, to $2.0606 a gallon in New York, the lowest settlement since June 11. Heating oil for July delivery declined 3.96 cents, or 2 percent, to end the session at $1.9817 a gallon, the lowest since June 8.

Stockpiles of gasoline were forecast to decrease by 400,000 barrels, according to the median response of 16 analysts surveyed by Bloomberg News. Supplies of crude oil were estimated to drop 1 million barrels.

“There’s something here for everybody,” said Kyle Cooper, managing director at energy consultant IAF Advisors in Houston. “There’s bearish information for people looking for it, and bullish information as well. Oil seems reasonably valued between $70 and $80.”

Fuel Stockpiles

Supplies of distillate fuel climbed 2.46 million barrels to 159.4 million, the highest level since the week ended Jan. 8, the report showed. Analysts forecast a 950,000-barrel gain.

The increase in fuel supplies narrowed the margin, or crack spread, for processing three barrels of oil into two of gasoline and one of heating oil to the lowest level since April 8. The margin slipped 3.1 percent to $10.251 a barrel, based on New York futures prices.

“We’re seeing the main reaction to the DOE report in the crack spread, which makes sense,” said Hamza Khan, an analyst with market intelligence publisher Schork Group Inc. in Villanova, Pennsylvania. “Crude oil futures are strong in relation to the products.”

Weak Demand

Total fuel consumption declined 2.7 percent to 19 million barrels a day, the lowest level since April, the report showed. Gasoline demand rose 2.4 percent to 9.46 million, the highest level since August.

“Overall fuel consumption remains very weak,” Cooper said. “It may be above the dismal levels of a year ago, but that’s not saying much. Conversely, people must still be driving because gasoline was the one bright spot.”

Oil in New York has been above the 40-day moving average since June 15. A settlement below that point, which stands at $74.31, would be a technical indicator that prices will extend declines, said Michael Fitzpatrick, vice president of energy at MF Global in New York.

“We could soon close below the 40-day moving average, which would be a signal for all the technical traders to sell,” Fitzpatrick said.

Hurricane Alex

Hurricane Alex, the first June Atlantic hurricane since 1995, is prompting oil and gas companies in the Gulf of Mexico to evacuate offshore workers and prepare for possible storm surges that may disrupt production at coastal refineries. About 25 percent of crude production in the Gulf and 9 percent of natural-gas output has been halted, the U.S. government said.

Alex had maximum sustained winds 85 mph (137 kph) at 1 p.m. Houston time, according to a National Hurricane Center bulletin. It’s heading for landfall in northeastern Mexico.

“The hurricane is being discounted before making landfall because it looks like it is moving away from oil infrastructure and will hit the Mexican coast,” said Peter Beutel, president of energy adviser Cameron Hanover Inc. in New Canaan, Connecticut.

Brent crude oil for August delivery declined 43 cents, or 0.6 percent, to end the session at $75.01 a barrel on the London-based ICE Futures Europe exchange. The contract slipped 9.3 percent this quarter, and 3.7 percent this year.

Oil volume on the Nymex was 540,677 contracts at 3:14 p.m. in New York. Volume totaled 524,019 contracts yesterday, 32 percent less than the average of the past three months. Open interest was 1.26 million contracts.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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