Crude Oil Declines Most in Three Weeks After Consumer Confidence Report
Crude oil tumbled the most in more than three weeks in New York after the Conference Board reported confidence among U.S. consumers fell, a sign that economic growth and energy demand may be restrained.
Oil lost 1.9 percent as the confidence index declined to the lowest level in five months. The gauge was at 50.4 from a revised 54.3 in June, the New York-based private research group showed today. It was forecast to drop to 51, according to the median estimate in a Bloomberg News survey.
“At the first sign of economic weakness, oil is pulling back a little bit,” said Phil Flynn, vice president of research at PFGBest in Chicago. “There’s a glut of supply, we’re past the summer driving season and there’s not a lot of tropical activity in the Gulf of Mexico. Other than the hope the economy will explode, there aren’t a lot of reasons to be long.”
Crude for September delivery decreased $1.48 to settle at $77.50 a barrel on the New York Mercantile Exchange, the biggest decline since July 1. Oil has fallen 2.3 percent this year.
Prices declined from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles increased 3.08 million barrels to 356.3 million. September oil fell $1.68, or 2.1 percent, to $77.30 a barrel in electronic trading at 4:31 p.m.
Estimates for consumer confidence ranged from 46 to 55.5 in the Bloomberg survey of 73 economists after a previously reported 52.9 reading in June. The Conference Board measure averaged 98 during the expansion that ended in December 2007.
Oil Supplies
A government report tomorrow may show U.S. oil inventories dropped to a four-month low, according to a Bloomberg News survey. Supplies in the week ended July 16 were at the highest level in 17 years for the third week in July.
U.S. stockpiles fell 1.73 million barrels, or 0.5 percent, in the seven days ended July 23 from 353.5 million the week earlier, according to the median estimate of 16 analysts surveyed by Bloomberg. The last time supplies were so low was the week ended March 19, when prices averaged $81.46 a barrel.
The Energy Department report is scheduled for release at 10:30 a.m. tomorrow in Washington.
Tropical Storm Bonnie dissipated on July 24 without damaging Gulf of Mexico production platforms or refineries. Producers idled as much as 52 percent of U.S. Gulf oil output and have restored all but 15 percent of the total, according to the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement.
Buying Opportunities
Goldman Sachs Group Inc. said crude prices are too cheap. In a report yesterday, Goldman said futures prices are “significantly” below the level warranted by “fundamentals,” offering buying opportunities for this year and next.
The balance between supply and demand will continue to tighten in the second half of this year as global economic growth boosts demand, returning inventories to “more normal” levels, according to the report.
U.S. fuel demand in the four weeks ended July 16 fell 23,000 barrels a day to an average 19.2 million from the prior period, according to the Energy Department. The four-week average has dropped 2.6 percent since the week ended June 4. Demand for July is the second-lowest in more than a decade, after 2009.
Gasoline Demand
Gasoline demand rose 1.7 percent last week, as U.S. motorists bought an average 9.51 million barrels a day of the motor fuel in the week ended July 23, according to MasterCard Inc.’s SpendingPulse report today. The gain was the second in a row and the sixth in seven weeks.
Oil touched $79.69 a barrel, the highest level since May 6, in intraday trading today as global equities gained before the consumer confidence report.
The Standard & Poor’s 500 Index fell 1.17 points to 1,113.84. The Dow Jones Industrial Average gained 12.26 points to 10,537.69.
Iranian Oil Minister Masoud Mir-Kazemi said yesterday that new sanctions imposed by European Union governments won’t curtail the country’s oil production. The country is the second- largest oil producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia.
The measures, designed to back U.S. efforts to force Iran to halt uranium enrichment and stop any potential pursuit of a nuclear weapons capability, include a ban on new investment in or equipment sales to Iran’s oil and natural-gas industries.
Brent crude for September settlement fell $1.37, or 1.8 percent, to $76.13 a barrel on London’s ICE Futures Europe exchange.
Oil volume in electronic trading on the Nymex was 507,056 contracts as of 4:27 p.m. in New York. Volume totaled 331,200 contracts yesterday, 53 percent below the average of the past three months. Open interest was 1.24 million contracts.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
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