Brent oil declined to its lowest in five months before a report that may show U.S. stockpiles climbed to the highest level since 1990 and after economic confidence in the euro area fell more than forecast.
Brent futures dropped below $105 a barrel in London for the first time since Dec. 20. In the U.S., prices are heading for the biggest monthly drop in more than three years. American crude inventories rose 800,000 barrels to 383.3 million last week, according to the median estimate of eight analysts in a Bloomberg News survey before the Energy Department report tomorrow. Economic confidence in the euro area fell to its lowest since 2009, a European Commission report today showed.
“Investors are pulling out with increasing problems in the euro zone,” said Thina Margethe Saltvedt, an analyst at Nordea Bank AB in Oslo. “That’s pulling the market lower. The U.S. market seems to be more-than-well-supplied.”
Brent oil for July settlement fell as much as $2.14, or 2 percent, to $104.54 a barrel on the London-based ICE Futures Europe exchange. It was at $104.96 at 1:17 p.m. London time. The European benchmark contract’s premium to West Texas Intermediate narrowed to $15.59 from $15.92 yesterday.
WTI crude for July delivery on the New York Mercantile Exchange was down $1.39, or 1.5 percent, at $89.37. The contract yesterday slid 10 cents to $90.76, the lowest close since May 24. Prices are down 15 percent this month, the biggest drop since December 2008.
Oil in New York has long-term technical support at $89.83 a barrel, according to data compiled by Bloomberg. On the weekly chart, that’s the 50 percent Fibonacci retracement of the drop to $32.40 in December 2008 from an intraday record high of $147.27 in July that year. Buy orders tend to be clustered near chart-support levels.
“Demand out of the U.S. and the euro zone has been very soft,” David Lennox, an analyst at Fat Prophets in Sydney, said in a telephone interview. “For the foreseeable future, barring any supply-side shocks, oil will stay around $90 a barrel. If there’s going to be any movement, it’s not likely to be up.”
U.S. gasoline stockpiles probably fell 250,000 barrels last week, according to the Bloomberg survey before tomorrow’s Energy Department report. Distillate supplies, a category that includes heating oil and diesel, will likely remain unchanged at 119.5 million barrels, the survey shows.
Gasoline Pump Prices
The American Petroleum Institute will release separate inventory data today. 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.
U.S. gasoline at the pump fell below year-earlier levels for the sixth straight week, the Energy Department said in a weekly retail report yesterday. The national average price for regular gasoline dropped 4.5 cents to $3.669 a gallon from a week earlier, it said.
BNP Paribas cut its 2012 price forecast for New York crude by $7 to $100 a barrel, and its estimates for Brent by $4 to $115 a barrel, as Europe’s debt crisis worsened, according to an e-mailed report. Prices will still advance in the third quarter because of sanctions against Iran and shrinking spare production capacity in the Organization of Petroleum Exporting Countries, the bank said.
Economic confidence in the euro area declined in May to the lowest since October 2009. An index of executive and consumer sentiment in the 17-nation euro area fell to 90.6 from a revised 92.9 in April, the European Commission in Brussels said today. That’s below the 91.9 forecast by economists, according to the median of 28 estimates in a Bloomberg News survey.