West Texas Intermediate crude declined with gasoline as U.S. inventories of the motor fuel expanded for a third week, threatening to depress refining margins. Brent also fell.
Gasoline stockpiles grew by 3.38 million barrels last week and supplies around New York Harbor, where futures contracts are delivered, were at the highest seasonal level since 2008, Energy Information Administration data showed. Gasoline futures ended at the lowest price in almost six months.
“The key feature that’s driving the market down is gasoline,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Relatively limited gasoline demand is a key fundamental element in the market now.”
WTI for September delivery slipped $1.05, or 1 percent, to end at $102.07 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 23 percent below the 100-day average for the time of day.
Brent for September settlement declined 96 cents, or 0.9 percent, to close at $107.07 a barrel on the London-based ICE Futures Europe exchange. Volume was 23 percent below the 100-day average. The European benchmark crude ended at a premium of $5 a barrel to WTI, up from $4.91 yesterday.
Gasoline supplies increased to 217.9 million barrels in the week ended July 18, the most since March 14, according to the EIA, the Energy Department’s statistical arm. In the Central Atlantic region, supplies were little changed at 30.3 million. Implied demand for gasoline fell 265,000 barrels a day to 8.79 million, the weakest since June 6.
Distillate inventories, including heating oil and diesel, rose by 1.64 million barrels last week, the EIA report showed.
“The increase in gasoline and distillate inventories and the fall in demand is weighing on the entire complex,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.
Gasoline futures for August delivery dropped 2.33 cents to $2.8368 a gallon on the Nymex, the lowest settlement since Feb. 28. Ultra low sulfur diesel dropped 0.45 cent to $2.8709.
“Demand must be waning a bit and that’s why we are seeing prices come down,” said Phil Streible, a Chicago-based commodities broker at RJO Futures.
U.S. refineries operated at 93.8 percent of their capacity last week. The crack spread, the profit to process three barrels of oil into two of gasoline and one of heating oil, widened for the second time in eight days, ending the day at $17 as crude fell more than gasoline and diesel. The front-month 3-2-1 spread was $21.21 on July 14.
Oil also declined as the International Monetary Fund lowered its outlook for global growth this year. The world economy will advance 3.4 percent in 2014, the IMF said, less than its 3.6 percent prediction in April and stronger than last year’s 3.2 percent.
“The IMF report is very negative,” said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. “Weak demand is depressing the prices.”