Oil Trades Near Two-Day Low on Bets U.S. Supplies to Gain

Oil traded near the lowest level in two days in New York before data that may show inventories rose to an 11-month high in the U.S., the world’s biggest consumer of the commodity.

Futures for June delivery were little changed after falling 0.7 percent yesterday. U.S. stockpiles increased 2.65 million barrels last week to 371.7 million, according to the median estimate of eight analysts surveyed by Bloomberg News before a government report tomorrow. The U.S. may still tap strategic reserves to limit price gains stoked by tension with Iran, with a release likely before a European Union embargo starts on July 1, Societe Generale SA said.

“The market is very evenly divided between the bulls and the bears,” said Jonathan Barratt, chief executive of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “There are quite a few things that could move it but no one is prepared to lead and I think that’s keeping the prices relatively subdued.”

Crude for June delivery was at $102.94 a barrel in electronic trading on the New York Mercantile Exchange, down 17 cents, at 2:55 p.m. Singapore time. The contract fell 77 cents to $103.11 yesterday. Front-month prices are 4.2 percent higher this year.

Brent oil for June settlement on the London-based ICE Futures Europe exchange declined 13 cents to $118.58 a barrel, leaving the European benchmark contract at a premium of $15.64 to New York futures. The difference was $15.60 yesterday, the most in six days.

Crude Supplies

Oil in New York is in a technical downtrend, according to data compiled by Bloomberg. On the daily chart, the top of a downward-sloping channel going back about two months is $104.53 a barrel today and represents price resistance, a level at which sell orders tend to be clustered.

U.S. crude stockpiles are forecast to climb for a fifth week to the highest since May, according to the Bloomberg survey. Gasoline supplies probably dropped 750,000 barrels last week, the survey showed. Distillate-fuel inventories, a category that includes heating oil and diesel, gained an estimated 625,000 barrels.

The American Petroleum Institute will release separate supply data today. The industry group 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.

Strategic Oil Release

A release of strategic oil stockpiles will probably happen in June, before the start of the sanctions on July 1, Michael Wittner, global head of oil-market research at Societe Generale in New York, said in a note dated yesterday. About 60 million barrels may be freed up, with only a “brief, temporary” lowering of prices, according to the report.

A decision to tap the reserves is “pretty likely” when the EU embargo starts, Seth Kleinman, a Citigroup Inc. analyst in London, said on a conference call yesterday. The Persian Gulf nation has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil, in retaliation against sanctions.

Iran can compensate for lost European Union markets by redirecting oil supplies to Asia if the EU implements its ban, Deputy Foreign Minister Abbas Araqchi said yesterday in Astana, Kazakhstan.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Mike Anderson at manderson34@bloomberg.net

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