Oil Falls in New York as IEA Says Global Supplies Have Improved

Crude oil declined in New York as the International Energy Agency said global markets are better supplied than earlier this year and U.S. retail sales dropped.

Futures slid as much as 1.2 percent. The Paris-based IEA said in a monthly report today that global supplies increased by 200,000 barrels to 91.1 million barrels a day in May. U.S. crude inventories, which rose to the highest since 1990 at the end of May, may drop this week, according to a Bloomberg News survey before a government report. U.S. retail sales fell in May for a second month, a sign the world’s largest economy is cooling.

“There’s still an overhang in crude inventories in the U.S. and stocks have built globally in the first half of the year,” Gareth Lewis-Davies, an analyst at BNP Paribas SA in London, said by phone. “The market is being affected, as with other commodities, by swings in trader risk aversion.”

Oil for July delivery fell as much as 99 cents to $82.33 a barrel in electronic trading on the New York Mercantile Exchange and was at $82.54 as of 1:49 p.m. London time. It traded as high as $83.82 earlier today. Prices are down 17 percent this year.

Brent crude for July settlement on the London-based ICE Futures Europe exchange, which expires tomorrow, rose 5 cents to $97.19 a barrel. The European benchmark grade was at a premium of $14.71 to New York crude compared with $13.82 yesterday, the lowest since May 5. The more-actively traded August contract was down 5 cents at $96.92.

Better Supplied

The IEA said the oil market is better supplied amid concern that slowing economic growth will curb crude demand. The agency cut its forecast for 2012 crude consumption to 89.9 million barrels a day, down by 100,000 barrels from May and reflects an increase of 820,000 barrels from last year.

The Organization of Petroleum Exporting Countries, which meets tomorrow in Vienna, cut production last month, ending seven months of increases, as Saudi Arabia and Iraq lowered supplies, the IEA said.

Abdalla El-Badri, OPEC’s secretary-general, said today in Vienna that “there is some oversupply in the market” for oil.

OPEC, responsible for about 40 percent of global oil supply, pumped 31.58 million barrels a day last month, the group’s secretariat said in its Monthly Oil Market Report yesterday, citing secondary sources. That’s down from 31.64 million in April and exceeds its quota of 30 million agreed on in December.

Output Ceiling

Saudi Arabia, Kuwait, Qatar and the United Arab Emirates would like to raise the output ceiling by 500,000 barrels a day, an OPEC delegate said yesterday, declining to be identified because member countries are still in talks. Iran, facing a European Union embargo on its oil exports from July 1, and Venezuela have been joined by Iraq and Angola in warning that supplies are excessive.

OPEC will keep the production ceiling at 30 million barrels a day, according to all 20 traders and analysts surveyed by Bloomberg News last week.

Retail sales in the U.S. fell as slower employment and subdued wage gains damped demand. The 0.2 percent decrease followed a similar decline in April that was previously reported as a gain, Commerce Department figures showed today in Washington. Sales excluding automobiles slumped by the most in two years.

A U.S. Energy Department report today may show crude supplies decreased 1.5 million barrels, according to the median estimate of 12 analysts surveyed by Bloomberg News. Gasoline inventories are forecast to rise 1.4 million barrels, the survey showed. The department is scheduled to release its weekly report at 10:30 a.m. Washington time.

Venezuela holds the largest proven oil reserves in the world, overtaking Saudi Arabia, according to BP Plc.

The South American country’s deposits were at 296.5 billion barrels at the end of last year, surpassing Saudi Arabia’s 265.4 billion barrels, BP said today in its annual Statistical Review of World Energy. The 2010 estimate for Venezuela was revised to the same amount, up from 211.2 billion in the previous report.

Global reserves advanced to 1.65 trillion barrels at the end of last year, a 1.9% percent increase from a revised 1.62 trillion in 2010, BP said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE