Oil Trades Near One-Week Low on U.S. Stockpiles, European Crisis

Oil traded near the lowest price in a week after a report showed U.S. crude stockpiles surged, indicating fuel demand may be weakening as Europe’s debt crisis threatens to slow the global economy.

Futures in New York were little changed after sliding 2 percent yesterday, the first decline in seven days, as record European Central Bank lending signaled the growing risk of the region’s crisis. Crude inventories rose 9.57 million barrels last week, according to the industry-funded American Petroleum Institute. A U.S. Department of Energy report today was forecast to show supplies fell 2.5 million in a Bloomberg News survey.

“In order for bears in the oil market to build on yesterday’s weakness we are going to need to see the DOE corroborate the API report,” Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania, said in a report. “Yesterday oil markets traded lower in sympathy with post-ECB reactions in the currency and equity markets.”

Crude for February delivery was at $99.59 a barrel, up 23 cents, in electronic trading on the New York Mercantile Exchange at 4:15 p.m. Singapore time. The contract yesterday fell $1.98 to $99.36 in the biggest decline in two weeks. Prices are up 9 percent this year after climbing 15 percent in 2010.

Brent oil for February settlement was up 29 cents at $107.85 a barrel on the London-based ICE Futures Europe exchange. The European contract’s premium to New York crude was $8.26, compared with a record $27.88 on Oct. 14.

Fuel Stockpiles

U.S. inventories of distillate fuels, a category that includes heating oil and diesel, gained 554,000 barrels, while gasoline stockpiles rose 1.86 million barrels, the API’s weekly report showed.

The Energy Department report may show declines of 650,000 barrels in heating oil and 500,000 barrels of gasoline, according to the Bloomberg survey. The agency is scheduled to release its inventory data at 11 a.m. today in Washington, a day later than usual because of the Christmas holiday.

Implied demand for gasoline fell by 7 percent last week to

9.8 million barrels a day, the API reported. That was the largest percentage decline since the week of Oct. 7. Distillate consumption dropped by 11 percent to 5.1 million barrels daily, the biggest change since Sept. 2, data from the group showed.

The ECB’s balance sheet soared to a record 2.73 trillion euros ($3.53 trillion) after it lent financial institutions more money last week to keep credit flowing to the economy during the debt crisis, the Frankfurt-based bank said yesterday. The euro slid to the lowest level since January against the dollar, curbing investor demand for commodities priced in the U.S. currency.

“There is a tendency for the euro and commodities to move in the same direction,” said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo. “Under such circumstances, the upside for commodities will also be limited.”

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE