West Texas Intermediate crude fell for the first time in three days as U.S. stocks declined and Federal Reserve Bank of Kansas City President Esther George said the central bank should taper its asset-buying soon.
Futures dropped 0.3 percent as the Standard & Poor’s 500 Index snapped the longest rally since January.George, who has consistently voted this year against record stimulus, said in an interview with Fox Business Network that the Fed should reduce the $85 billion in monthly bond buying. Crude also slipped as technical indicators signaled recent rallies were excessive.
“The market is moving with the equities,” said Bill Baruch, a senior market strategist at commodity trading firm Iitrader.com in Chicago. “If there is any signs of Fed curtailing, people may become nervous. There is a lot of profit-taking going on.”
WTI for August delivery slid 32 cents to settle at $106 a barrel on the New York Mercantile Exchange. It reached $107.45 on July 11, the highest intraday level since March 27, 2012. The volume of all futures traded was 2.4 percent above the 100-day average for the time of day.
Prices were little changed after the American Petroleum Institute was said to report crude stockpiles dropped 2.6 million barrels last week, according to a person familiar with the report. The August contract fell 50 cents to $105.82 at 4:47 p.m. in electronic trading on the Nymex, unchanged from the price just before the report was released at 4:30 p.m.
Brent for August settlement rose 31 cents, or 0.3 percent, to $109.40 a barrel on the London-based ICE Futures Europe exchange. The contract expired today. The more active September futures climbed 6 cent to $108.14. Volume was 13 percent below the 100-day average. Brent’s premium over WTI widened to $3.40 from the previous day’s $2.77.
The S&P index dropped for the first time in nine days, slipping 0.4 percent, after George said the Fed should “begin to adjust those purchases” of Treasuries and mortgage-backed securities. Fed Chairman Ben S. Bernanke is scheduled to speak before Congress tomorrow.
The U.S., the biggest oil-consuming country, accounted for a fifth of world’s oil consumption last year, according to BP Plc’s Statistical Review of World Energy.
WTI’s relative strength index was 71.1 today, down from 72.8 yesterday. Some investors start selling contracts when the reading rises above 70, a threshold that indicates to some traders that a commodity is poised to fall.
“The market is due for a correction,” said Jeff Grossman, president of New York-based BRG Brokerage and a New York Mercantile Exchange floor trader. “At this price, the market will have to come off. The economy is not strong enough and I don’t think demand is that strong.”
World oil consumption will climb by 1.2 million barrels a day next year, the Paris-based International Energy Agency said on July 11 in its first monthly report with forecasts for 2014. Supplies from outside the Organization of Petroleum Exporting Countries will jump by 1.3 million barrels a day amid booming output in North America, curbing the need for crude from the 12-member producer group, according to the report.
Oil rose as much as 0.8 percent in intraday trading on expectations a government report tomorrow may show U.S. inventories dropped for a third week.
Stockpiles probably dropped by 2 million barrels in the seven days ended July 12, following a decline of 20.2 million in the prior two weeks, according to a Bloomberg survey before tomorrow’s Energy Information Administration report.
“We had two very bullish reports in a row,” Grossman said. “If there is another one, I guess the market will stay up here.”
Refineries boosted their operations as gasoline consumption increased to an 11-month high in the week ended July 5, the EIA, the Energy Department’s statistical arm, said last week. Fuel demand is strongest from the last weekend in May to the Labor Day weekend in early September, the prime U.S. vacation period.
Gasoline at U.S. pumps jumped this week by the most since February, the EIA said yesterday. Regular gasoline at filling stations rose 14.7 cents from a week earlier to $3.639 a gallon, the highest level since June 10. This week’s gain was the largest since Feb. 4.
The industry-funded 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 EIA for its weekly survey. API began releasing its weekly supply statistics on a subscription basis this month.
“Nobody is really sticking their neck out to take too much risk,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “People are trying to play cautiously here.”
Implied volatility for at-the-money WTI options expiring in September was 21.5 percent, compared with 21.4 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 562,210 contracts as of 4:48 p.m. It totaled 518,891 contracts yesterday, 22 percent below the three-month average. Open interest was a record high 1.88 million contracts.
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