Oil declined for the first time in four days amid signs of increasing supply in the U.S. and speculation that western countries may tap emergency reserves.
New York futures slipped as much as 1.2 percent before a government report that may show inventories rose to a six-month high last week. Prices also declined after French Industry Minister Eric Besson said the U.S. proposed releasing oil from strategic reserves to curb rising prices.
“Talk of releasing strategic stocks is the main impact on oil today,” said Thorbjorn Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark, highlighting planned elections in the U.S. and France where Barack Obama and Nicolas Sarkozy are in office. “It is election year for Sarkozy and Obama, and we may see lower exports from Iran, so they may have a good reason to release stocks in the months ahead.”
Oil for May delivery fell as much as $1.32 to $106.01 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.09 at 1:16 p.m. London time. It gained 30 cents yesterday to $107.33, the highest close since March 19. Prices are 7.4 percent higher this year and headed for a second consecutive quarterly gain.
Brent oil for May settlement slid $1.37 to $124.17 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium, or spread, to West Texas Intermediate was at $18.08, compared with $18.21 yesterday.
The U.S. is weighing the option of using its Strategic Petroleum Reserve to ease potential supply restrictions, an Energy Department official said yesterday, echoing comments by Secretary Steven Chu in recent weeks.
“It is being considered,” Charles McConnell, acting assistant secretary for fossil energy, said at a hearing in Washington. “It has been in consideration for some time, and no decision has been made.”
The IEA, the energy adviser to 28 countries, coordinated the release of reserves last year after crude exports were disrupted from Libya.
The French government welcomed a U.S. proposal to release fuel, Besson said today in Paris after a cabinet meeting. France is waiting for an IEA report on inventories before making a decision, according to Valerie Pecresse, France’s budget minister, who spoke at a later press conference.
Crude has gained this year because of concern that Western sanctions aimed at halting the country’s nuclear program will disrupt Middle East supplies. Iran has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil, in response to an embargo on its oil exports.
U.S. oil stocks jumped 3.6 million barrels, while gasoline stocks increased 1.3 million barrels, the American Petroleum Institute said yesterday. Stocks of the motor fuel are estimated to fall 1.6 million barrels in today’s Energy Department report, according to the median of 12 analyst estimates in a Bloomberg News survey. Distillate inventories, a category that includes heating oil and diesel, slipped 1.4 million barrels, the API said, compared with a forecast for a 500,000-barrel decline.
“We have an oversupply in the oil market, and we expect data from the Department of Energy today to show stocks will rise further,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt. “There is nothing new on the Iran front, suggesting this situation isn’t escalating further, so there is no impetus to buy.”
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Iran will meet with representatives from the U.S. and five other countries for talks over its nuclear program on April 14 in Istanbul, the first such negotiations in almost 15 months, the Wall Street Journal reported, citing a senior European Union diplomat it didn’t identify. Iran is OPEC’s second-biggest producer after Saudi Arabia.
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