West Texas Intermediate oil fell the most in three weeks as a government report showed U.S. gasoline supplies unexpectedly gained and crude stockpiles declined less than expected.
Futures dropped 2 percent after the Energy Information Administration said gasoline inventories advanced 3.02 million barrels to 220.7 million. Supplies were forecast to decrease 300,000 barrels, according to the median of 11 analyst estimates in a Bloomberg survey. Crude supplies slipped 338,000 barrels to 394.6 million, less than half as much as forecast. The price decline accelerated as the dollar strengthened.
“The fundamentals are weighing on the market along with the strength of the dollar,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Even with a decline, we’re looking at almost 395 million barrels of crude, which is more than ample.”
WTI oil for July delivery fell $1.90 to settle at $94.28 a barrel on the New York Mercantile Exchange. It was the biggest decline since May 1 and the lowest settlement since May 14. The volume of all contracts traded was 12 percent above the 100-day average at 3:16 p.m.
Gasoline for June delivery dropped 2.64 cents, or 0.9 percent, to end the session at $2.8194 a gallon on the Nymex. It was the lowest settlement since May 2. Trading volume was 25 percent above the 100-day average.
“Today’s gasoline number is enough to make investors complacent about inventories as we near the upcoming driving season,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Consumption of gasoline over the past four weeks was 8.5 million barrels a day, the lowest seasonal level in at least 10 years. The total was up 10,000 barrels a day from the previous week. The peak-demand summer driving season when Americans usually take vacations begins with the May 27 Memorial Day holiday and ends in early September with Labor Day.
“There’s no demand for gasoline,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “The data shows that demand rose last week, but the inventory gain paints a bearish picture. There was no measurable movement to wholesalers or retailers ahead of Memorial Day.”
Refineries operated at 87.3 percent of capacity last week, down from 88 percent in the seven days ended May 10, the report showed. Gasoline production climbed 285,000 barrels a day to 9.21 million last week, the highest rate this year.
“Refiners cut back on utilization rates and were still able to push 3 million barrels into storage,” McGillian said.
Crude supplies have dropped two straight weeks after climbing to 395.5 million in the week ended May 3, the most since 1931, according to the EIA, the Energy Department’s statistical unit. A 1 million-barrel decline was forecast in the Bloomberg survey.
Surging North American crude output has bolstered stockpiles at Cushing, Oklahoma, the delivery point for WTI. Inventories there, which reached a record 51.9 million barrels in the week ended Jan. 11, rose 449,000 barrels to 50.2 million last week. Output, which fell 63,000 barrels a day to 7.26 million last week, reached a two-decade high of 7.37 million the seven days ended May 3.
Brent oil for July settlement fell $1.31, or 1.3 percent, to end the session at $102.60 a barrel on the London-based ICE Futures Europe exchange. Volume for all contracts was 21 percent lower than the 100-day average. The European benchmark grade traded at a $8.32 premium to WTI, up from $7.73 yesterday.
“The Cushing supply build should widen the Brent-WTI spread,” Finlon said.
Crude stockpiles in China, the biggest oil-consuming country after the U.S., climbed a second month. Crude stockpiles rose 0.1 percent in April, China Oil, Gas & Petrochemicals, a newsletter published by the official Xinhua News agency, reported today. Supplies rose to 28.7 million metric tons, a three-month high, according to Bloomberg calculations.
Oil also slipped as the Dollar Index rose to a 34-month high after Federal Reserve Chairman Ben S. Bernanke said the central bank may taper monthly bond purchases, known as quantitative easing, at its next few meetings if it’s confident of sustained gains in the economy. A rising dollar reduces the appeal of raw materials priced in the currency.
“The Bernanke comments hinting at a decline in quantitative easing are putting some downward pressure on the market,” said Michael Wittner, the head of oil-market research at Societe Generale SA in New York.
The index, which tracks the U.S. currency against six others, rose as much as 0.7 percent to 84.422, the most since July 2010. The gain was the eighth in 10 days.
Implied volatility for at-the-money WTI options expiring in July was 22 percent at 3:15 p.m., compared with 20.6 yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 567,957 contracts as of 3:18 p.m. It totaled 485,704 contracts in the previous session, 16 percent below the three-month average. Open interest was 1.74 million contracts, the lowest level since April 25.