Oil was little changed in New York as European Central Bank policy makers met to discuss a plan involving unlimited purchases of government debt to ease the region’s debt crisis.
Futures traded in a $1.41-a-barrel range after two central bank officials said Germany’s Bundesbank objected to the plan. Prices initially rose 0.4 percent on the proposal by ECB President Mario Draghi, who will announce a decision at a press conference tomorrow.
“The market is really reactive to whatever comes out of Europe right now,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We climbed earlier on the ECB headlines and are now backing off on the same news.”
Crude oil for October delivery rose 6 cents to settle at $95.36 a barrel on the New York Mercantile Exchange. Prices advanced to $95.67 earlier today and dropped as low as $94.26. Futures have retreated 3.5 percent this year.
Prices advanced from the settlement after the industry-funded American Petroleum Institute reported oil inventories dropped 7.21 million barrels last week to 359.3 million, the lowest level since March. The October contract was up 50 cents at $95.80 at 4:31 p.m. in electronic trading.
Brent oil for October settlement decreased $1.09, or 1 percent, to end the session at $113.09 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade traded at a $17.73 premium to West Texas Intermediate crude traded in New York. That’s down from $18.88 yesterday.
Under the ECB blueprint, which may be called “Monetary Outright Transactions,” the ECB would refrain from setting a public cap on yields, according to the two central bank officials briefed on the plan, and a third official, who spoke on condition of anonymity.
The plan will only focus on government bonds rather than a broader range of assets and will target short-dated maturities of up to about three years, two of the people said.
“I am mystified that we rose earlier on the ECB headlines,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.4 billion. “My first reaction was that we had been waiting for a while and this was all we got? The rally this summer was predicated on bazookas being unveiled by central banks and what we’re getting is pop guns.”
Oil dropped as much as 1.1 percent earlier as euro-area services shrank more than initially estimated in August.
A gauge of euro-area service industries based on a survey of purchasing managers fell to 47.2 from 47.9 in July, London-based Markit Economics said today. That’s below an initial estimate of 47.5 published on Aug. 23. A composite index of both services and manufacturing fell to 46.3 from 46.5, also below an initial estimate.
“As the economy goes, so goes oil,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “Any bad news out of Europe is going to send us lower.”
An Energy Department report tomorrow will probably show U.S. crude supplies tumbled to a five-month low last week because of Hurricane Isaac, a Bloomberg survey showed. Supplies of gasoline and distillate fuel, a category that includes heating oil and diesel, are also forecast to decline.
The department is scheduled to release its weekly report at 11 a.m. tomorrow in Washington. The release is being delayed a day because of the Labor Day holiday Sept. 3.
About 95 percent of oil output from the Gulf was shut on Aug. 31, three days after Isaac made landfall, according to the Bureau of Safety and Environmental Enforcement. More than 49 percent of oil production from the Gulf remained shut today, a BSEE report showed.
“It looks like oil production is rebounding nicely in the Gulf,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “The recovery is weighing on the market.”
Electronic trading volume on the Nymex was 454,993 contracts as of 4:32 p.m. in New York. Volume totaled 513,607 yesterday, 4.4 percent below the three-month average. Open interest was 1.53 million, the most since May 16.