Oil fell as inventories at Cushing, Oklahoma, rose to the highest level in nine months and Saudi Arabia sought to ease concern that tension with Iran would disrupt supplies.
Prices declined after the Energy Department said stockpiles at Cushing, the delivery point for New York futures, increased 7 percent and total U.S. inventories rose. Saudi Arabian Oil Minister Ali al-Naimi said the kingdom would make up any “perceived or real” shortfalls. Prices have risen this year as the U.S. and Europe tighten sanctions against Iran over its nuclear program.
“We traded right up to the $107 area but failed to break out and hold, and now it’s trying the other way,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “Supply hasn’t been an issue.”
Crude oil for April delivery declined $1.28, or 1.2 percent, to $105.43 a barrel on the New York Mercantile Exchange, the lowest settlement and the biggest decline since March 6. Oil, which ranged from $105.12 to $107.02, is up 6.7 percent this year.
Brent oil for April settlement fell $1.25, or 1 percent, to end the session at $124.97 on the London-based ICE Futures Europe exchange. Brent is up 16 percent is 2012.
Nationwide inventories of crude oil increased 1.75 million barrels to a six-month high of 347.5 million in the week ended March 9, the Energy Department report showed. Supplies were forecast to grow 1.6 million barrels, according to the median estimate of analysts surveyed by Bloomberg News. The increase was the fourth in a row and seventh in eight weeks.
Supplies of distillate fuel, a category that includes heating oil and diesel, dropped 4.68 million barrels to 134.8 million and gasoline inventories decreased 1.41 million barrels to 228.1 million last week. Both declines were bigger than analysts expected.
“We have a growing glut of crude but it’s not like we have extra supplies of refinery products,” said David McAlvany, chief executive officer of McAlvany Financial Group in Durango, Colorado. “We’ve got major disconnect between crude and products.”
Total petroleum consumption gained 2.2 percent to 18.6 million barrels a day, the report showed. Refineries reduced their production rate to 82.7 percent from the previous week’s 83.9 percent.
“There’s been a lot of talk and data but nothing that changes the fundamental outlook for the market, so the market is pretty stuck,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The inventory data was really mixed.”
There’s ample production and refining capacity, al-Naimi said in Kuwait today at the biennial International Energy Forum. Market volatility is caused by speculation, he told the meeting of producers and consumers.
“Saudi Arabia and others remain poised to make good any shortfall, perceived or real, in crude oil supply,” al-Naimi said, speaking on a panel that included U.S. Deputy Energy Secretary Daniel Poneman and Iranian Oil Minister Rostam Qasemi.
Some oil importers are using the commodity as a political weapon, Qasemi said in an interview. Those “unreasonable measures” will raise costs for governments pursuing them and bolster Iran’s oil revenue, he said.
Obama Warns Iran
Futures pared declines briefly after President Barack Obama warned that Iran is running out of time to enter serious negotiations over its nuclear program.
“The window for solving this issue diplomatically is shrinking,” Obama said at a White House news conference with U.K. Prime Minister David Cameron. “I’m determined to prevent Iran from getting a nuclear weapon.”
Oil production by members of the Organization of Petroleum Exporting Countries rose for a fifth month to the highest in more than three years as Saudi Arabia and Libya boosted supply, the International Energy Agency said in its monthly oil market report today.
Producers not in OPEC will provide 53.5 million barrels a day this year, or 200,000 a day less than the IEA forecast last month. The Paris-based IEA kept estimates for global oil demand in 2012 unchanged, predicting fuel use will remain “stunted” by the economic slowdown and higher prices.
Prices also fell as the Dollar Index, which tracks the U.S. currency against six counterparts, rose to an eight-week high after the Federal Reserve raised its economic assessment yesterday. The index rose as much as 0.5 percent to the strongest level since Jan. 18. Gains in the dollar reduce oil’s appeal as an investment alternative.
“The improvement of the U.S. economy probably means the dollar becomes a lot stronger and it’s going to weigh on oil prices,” said Phil Flynn, an analyst at PFGBest in Chicago.
Electronic trading volume on the Nymex was 591,961 contracts as of 3:07 p.m. in New York. Volume totaled 689,301 contracts yesterday, 9.9 percent above the three-month average. Open interest was 1.58 million.