By Christian Berthelsen
Oil futures declined again Wednesday as the reported resumption of Libyan crude production and a bearish report on U.S. stockpiles weighed on the market.
Light, sweet crude for August delivery fell $1.11, or 1.1%, to $102.29 a barrel on the New York Mercantile Exchange. Brent crude prices fell 66 cents to $108.28 a barrel on the ICE Futures Europe exchange.
The decline marked the ninth straight losing session for the U.S. benchmark contract and the eighth straight fall for the global Brent contract. U.S. prices hit their lowest level since May 16 and are down 4.6% from the June 20 peak, while the Brent contract hit its lowest level since May 9, down 5.9% from its June 19 peak.
Prices started the session lower after Libya announced the resumption of operations at its main oil fields. The price decline accelerated after official weekly U.S. oil storage data reflected a number of bearish factors, including a rise in stockpiles of refined gasoline at a time when demand was expected to increase. Analysts said technical factors appeared to take over and push prices lower still, prompting speculators who had driven bullish positions in the market to recent records to sell off.
"The market is still in the process of re-evaluating the supply situation," said Andy Lebow, a trader at investment bank Jefferies. "It's taken the long speculators out of the market. That's proved to be a fairly violent exit from the market."
Data from the U.S. Energy Information Administration showed nationwide crude stockpiles fell by 2.4 million barrels in the week ended July 4. The decline was nominally bullish for prices,larger than the 2 million-barrel decline projected by analysts surveyed by The Wall Street Journal as well as the 1.7 million-barrel drop projected by the American Petroleum Institute, an industry trade group.
But the headline number masked more bearish factors, including a 600,000-barrel increase in the amount of refined motor gasoline in storage during a week when inventories were expected to fall in response to strong holiday driving demand.
"Demand going into the Fourth of July holiday was not as strong as you might expect," said Phil Flynn, account executive with wholesale brokerage Price Futures Group. "Usually at this time of year, you need every gallon to meet demand. But demand actually fell over the Fourth of July holiday."
Mr. Flynn said the appearance of Hurricane Arthur along the East Coast took a toll on travel plans, which likely caused gasoline demand to slip.
The surprise jump in gasoline inventories also drove prices for reformulated gasoline blendstock, or RBOB, sharply lower, with the front-month August contract falling 3.5 cents, or 1.2%, to $2.9377 a gallon. August diesel lost 0.25 cent, or 0.1%, to $2.8711 a gallon, the lowest settlement since June 4.
The EIA report also reflected an increase of 450,000 barrels of supply at the key U.S. delivery point for the benchmark contract in Cushing, Okla., the second weekly increase in a row, reversing a trend of declining supplies there that has been a bullish driver for the market most of this year.
Earlier in the day, National Oil Co. said Libya's largest oil field, the 340,000-barrels-a-day Sharara, has resumed production after several previous false starts. The move follows the lifting of a force majeure on two terminals that account for nearly half of Libya's oil-export capacity, following a deal with militants who had occupied them.
Taken together, the restart of Sharara and the reopening of Ras Lanuf and Es Sider could bring Libyan oil production close to 1 million barrels a day, three times the current level, said Olivier Jakob of consultancy Petromatrix in a note.
The increase in available crude should be sufficient to offset the anticipated growth in demand for oil from the Organization of the Petroleum Exporting Countries in the second half of 2014, said Commerzbank analysts in a note to clients, thereby assuaging any fears of tightening supply. This points to a further decline in oil prices, they said.
More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:
Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close
(Ben Winkley and Benoit Faucon contributed to this article.)
-- Write to Christian Berthelsen at firstname.lastname@example.org
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(END) Dow Jones Newswires
July 09, 2014 16:06 ET (20:06 GMT)
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