West Texas Intermediate crude fell on forecasts that U.S. fuel supplies grew and as equities declined. Brent oil’s premium to WTI widened the most in two months.
Prices dropped as stockpiles of gasoline and diesel probably climbed last week, according to a Bloomberg survey before an Energy Information Administration report tomorrow. The Dow Jones Industrial Average and Standard & Poor’s 500 Index dropped as economists predicted the Federal Reserve may curb stimulus as soon as September.
“Market fundamentals are still weak,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “There is really not a whole lot for the bulls to hang on for WTI.”
WTI for July delivery slid 14 cents to settle at $93.31 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 21 percent above the 100-day average for the time of day at 5:08 p.m. Crude is up 1.6 percent this year.
Prices rose after the American Petroleum Institute reported that U.S. crude inventories tumbled by 7.79 million barrels last week to 387.4 million. The July contract gained 38 cents to $93.83 in electronic trading at 5:08 p.m., up from $93.40 before the report was released at 4:30 p.m.
Brent for July settlement increased $1.18, or 1.2 percent, to $103.24 a barrel on the ICE Futures Europe exchange. Volume was 32 percent above the 100-day average for the time of day.
The European benchmark’s premium over WTI widened to $9.93, the most based on settlement prices since April 26, and reached $10.05 in intraday trading. The spread was $7.65 on May 13.
“WTI has been lagging and falling back,” said Bill Baruch, a senior market strategist at Iitrader.com in Chicago. “The Brent-WTI spread is widening again.”
U.S. gasoline stockpiles probably increased by 1 million barrels last week, the Bloomberg survey showed. Inventories slid 0.7 percent in the week ended May 24 to 219.2 million barrels, 9.5 percent higher than a year earlier, the EIA, the Energy Department’s statistical arm, said last week.
Gasoline supplies slid 1.33 million barrels to 220.1 million in the API report.
Distillate fuels, including diesel and heating oil, probably climbed 1.4 million barrels, the survey showed. They advanced 241,000 barrels in the API report.
“The supply side is still weighing on the market,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The dollar is also putting pressure on oil. The trend has been more down than up.”
Crude stockpiles probably dropped 800,000 barrels to 396.8 million in the seven days ended May 31, the Bloomberg survey showed. Inventories surged to 397.6 million in the week of May 24, the most since 1931. Total petroleum consumption dropped 3 percent in the week to 18.3 million barrels a day.
“Inventories are rising and demand is not as strong as expected,” said Chris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Investors are expecting the same type of weak fundamental report tomorrow.”
The EIA is scheduled to release its weekly petroleum report at 10:30 a.m. tomorrow in Washington.
Oil erased an intraday gain of 1 percent as equities dropped and the dollar strengthened on the Fed speculation. The S&P 500 slid 0.6 percent, and the Dow declined 0.5 percent.
The Dollar Index, which measures the greenback against six other major currencies, rose 0.1 percent after declining 0.9 percent yesterday. A stronger dollar decreases oil’s appeal as an investment alternative.
Federal Reserve Bank of Atlanta President Dennis Lockhart said yesterday that the central bank is committed to record stimulus even as divergent views on when to start paring bond purchases create a “mixed message” to investors. The bank has expanded its balance sheet to a record $3.4 trillion with $85 billion of asset purchases a month to spur growth and reduce unemployment.
Implied volatility for at-the-money WTI options expiring in July was 23 percent, compared with 23.7 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 641,254 contracts as of 5:10 p.m. It totaled 642,594 contracts yesterday, the most in two weeks. Open interest was 1.73 million contracts.