Oil fell to a two-month low in New York after the government reported that U.S. crude production climbed to the highest level in more than 15 years and fuel consumption decreased.
Futures dropped 4.1 percent after the Energy Department said crude output rose 11,000 barrels a day to 6.52 million last week, the most since December 1996. Total fuel demand fell 0.3 percent to 18.3 million barrels a day in the four weeks ended Sept. 28, the lowest level since April. Crude and distillate stockpiles declined as gasoline supplies rose.
“The oil market is following the fundamentals today,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “We’re in a very comfortable situation as far as supply and demand are concerned.”
Crude oil for November delivery declined $3.75 to $88.14 a barrel on the New York Mercantile Exchange. It was the lowest settlement since Aug. 2. Prices are down 11 percent this year.
Brent oil for November settlement decreased $3.40, or 3 percent, to end the session at $108.17 a barrel on the London-based ICE Futures Europe exchange, the lowest close since Aug. 2. The European benchmark crude was at a premium of $20.03 to the New York-traded West Texas Intermediate grade, up from $19.68 yesterday.
The U.S. met 83 percent of its energy needs in the first six months of the year, department data show. If the trend continues through 2012, it will be the highest level since 1991.
A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Texas and Oklahoma. North Dakota’s output rose 26 percent this year through July, according to the department.
This technology unleashed a boom in natural gas output that propelled supplies to a record last year and sent prices to a decade low of $1.907 per million British thermal units in April.
“The demand picture is looking poor and the market’s in the midst of a down trend,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in Chicago. “We’re going lower.”
Crude oil supplies were up 8.4 percent last week from a year earlier, the Energy Department said today. Stockpiles dropped 482,000 barrels from the previous week to 364.7 million barrels. Inventories were forecast to increase 1.5 million barrels, according to the median of 11 analyst estimates in a Bloomberg survey.
Imports of crude increased 511,000 barrels a day to 8.11 million in the week ended Sept. 28. Shipments have arrived at an average rate of 8.84 million barrels a day this year.
“There’s certainly no shortage of crude oil in the U.S.,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Crude imports at 8.1 million barrels a day are at a low level by historical standards. The rise in domestic output kept supplies from posting a big decline.”
Crude oil stockpiles at Cushing, Oklahoma, the delivery point for WTI, rose 135,000 barrels to 43.9 million last week, the first gain in four weeks.
Gasoline inventories rose 114,000 barrels to 195.9 million last week, the department said. Stockpiles of distillate fuel, a category that includes heating oil and diesel, tumbled 3.67 million barrels to 124.1 million.
Demand for gasoline dropped 1.5 percent to 8.68 million barrels a day on average in the four weeks ended Sept. 28, the report showed.
“The inventory numbers were rather neutral but demand looks pretty awful,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “A weak economy and falling demand will probably leave us with fuller oil tanks in the months to come.”
Gasoline for November delivery dropped 6.97 cents, or 2.4 percent, to $2.7995 a gallon in New York, the lowest settlement since July 25. November heating oil slipped 5.91 cents, or 1.9 percent, to end the session at $3.0664 a gallon.
Futures declined before the report as a measure of China’s economy fell, signaling fuel demand may decrease in the world’s second-biggest user of the commodity, after the U.S.
Chinese services industries expanded at the weakest pace since at least March 2011, while euro-area services and manufacturing output contracted.
“Energy markets appear to be moving on concerns about weakening demand,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The Chinese non-manufacturing data seems to signal that we’ll be seeing less fuel use.”
China’s services purchasing managers’ index fell to 53.7 in September from 56.3 in August, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing today. The number was lower than any previous reading in data compiled by Bloomberg starting in March 2011.
“The malaise in Asia and Europe, especially in China, is finally being reflected in this market,” Schork said.
The dollar climbed as much as 0.3 percent to $1.2878 per euro, reducing the appeal of commodities to investors. The Standard & Poor’s GSCI Index of 24 commodities fell 2.3 percent.
Electronic trading volume on the Nymex was 596,616 contracts as of 4:38 p.m. Volume totaled 366,655 contracts yesterday, 30 percent below the three-month average. Open interest was 1.56 million.