West Texas Intermediate crude dropped with supplies at a seasonal record high and as the euro slipped against the dollar. Brent settled above $108 for a second day, widening the premium to WTI.
WTI fell after gaining the most in a month yesterday. Stockpiles slipped 1.78 million barrels last week, the Energy Information Administration reported, as imports to the Gulf Coast decreased by 643,000 barrels a day. Petroleum consumption declined in the seven days ended May 2. The euro weakened from a 2 1/2-year high as comments from European Central Bank President Mario Draghi raised the prospect of more stimulus.
“Fundamentals are really not tight,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Yesterday was an overreaction. We still have a lot of oil.”
WTI for June delivery slid 51 cents, or 0.5 percent, to end at $100.26 a barrel on the New York Mercantile Exchange. Trading was 16 percent above the 100-day average. Oil climbed 1.3 percent to $100.77 yesterday, the biggest gain since April 8.
Brent for June settlement slid 9 cents to $108.04 on the London-based ICE Futures Europe exchange. Volume was 7 percent above the 100-day average. The European benchmark crude was at a premium of $7.78 to WTI, compared with $7.36 yesterday.
U.S. crude supplies fell to 397.6 million barrels in the week ended May 2, according to the EIA, the Energy Department’s statistical arm. Stockpiles were projected to rise 1.25 million, according to a Bloomberg survey. Inventories rose to 399.4 million the previous week, the highest level since weekly EIA data started in 1982.
“People realized that even with the drawdown last week, supplies are still pretty ample right now,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The market is pulling back a little bit after the big run-up yesterday.”
Total imports fell by 598,000 barrels a day last week, led by the drop in the Gulf Coast. Gulf imports reached the lowest level since September 2008 last week as supplies in the region, known as PADD 3, climbed to a record high the prior week. Inventories have been growing as the southern leg of the Keystone XL pipeline began moving oil to Gulf refineries from Cushing, Oklahoma, the delivery point for Nymex futures, in January.
“We are not really seeing a strong need to bring in any more oil than we already have coming down from Cushing,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “Demand is still not strong.”
Total oil consumption fell 297,000 barrels a day, or 1.6 percent, to 18.6 million last week, the EIA said.
Crude also declined as the euro dropped as much as 0.4 percent to $1.3849 after rising to $1.3993 earlier. A weaker euro and stronger dollar reduce oil’s investment appeal.
The common currency weakened after Draghi said policy makers were comfortable with taking additional policy action in June if needed. ECB kept its benchmark interest rate at a record-low 0.25 percent at a meeting today in Brussels.
Brent’s losses were limited as President Vladimir Putin said Russia is testing its army’s combat readiness, ramping up tensions after pledging a pullback from Ukraine’s border. NATO said there’s no sign of any Russian withdrawal from the frontier.
Implied volatility for at-the-money WTI options expiring in July was 15.2 percent, down from 15.7 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 500,744 contracts at 2:52 p.m. It totaled 612,984 contracts yesterday, 14 percent above the three-month average. Open interest was 1.64 million contracts.