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Oil Price Falls as US Crude Inventories Continue to Rise

Wednesday, 18 April 2012 03:20 PM

Oil futures fell on Wednesday as U.S. crude inventories rose more than expected last week to post the biggest four-week rise in more than three years, outweighing larger-than-expected drawdowns in gasoline and distillate stockpiles.

Oil's losses came as commodity markets dropped broadly to reverse the previous day's gains, as renewed eurozone concerns dented investor appetite.

U.S. crude stocks rose 3.9 million barrels in the week to April 13, data from the U.S. Energy Information Administration (EIA) showed, dwarfing the forecast in a Reuters poll for a 1.4 million barrel increase.

In four weeks, U.S. crude stocks have risen nearly 22.8 million barrels, their biggest four-week build since February in more than three years, EIA data showed.

U.S. gasoline futures fell sharply, dragging down crude, even though EIA data showed that gasoline inventories fell 3.7 million barrels last week, their ninth consecutive week of drawdowns.

"Despite the drawdown, demand for gasoline remains anemic," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

U.S. gasoline demand over the past four weeks was 8.74 million barrels per day (bpd), 2.8 percent lower from a year ago, the EIA report showed.

"Bear in mind also that U.S. gasoline is moving lower with global benchmark Brent crude," he added.

Brent crude earlier fell below $118 a barrel, pressured by euro zone worries mainly due to Spain's debt troubles and as Mideast supply disruptions have eased with Iran continuing o talk with world powers over its ticklish nuclear program.

In London, ICE Brent for June delivery traded down 83 cents at $117.95 a barrel by 2:40 p.m. EDT (1840 GMT). It hit a session low of $116.70, the lowest since Feb. 10, threatening to fall bellow its 100-day moving average of $116.31.

U.S. May crude, which expires on Friday, settled at $102.67, falling $1.53. It skidded to a session low of $102.19, moving toward the 100-day moving average of $101.86. June crude closed at $103.12, down $1.52.

June Brent crude's premium against its counterpart U.S. crude contract recovered to near $15, after falling to $12.99, the narrowest since Feb. 1. The spread closed at $14.14 on Tuesday.



The transatlantic spread narrowed sharply this week on news earlier this week that the planned reversal of the Seaway pipeline flow from the Midwest to the U.S. Gulf Coast -- a move aimed to ease the glut of oil in central United States -- in mid-May, sooner than expected.

Crude oil inventories at the Cushing, Oklahoma, delivery point for U.S.-traded crude oil futures, have been at a high level, pressuring U.S. crude futures, also known as West Texas Intermediate, in recent months.

Last week, crude oil stored there rose 592,000 barrels to 41.18 million barrels, the highest level since May 2011, the EIA report showed.

Even so, "the stepped up reversal of the Seaway pipeline in about a month has been fully priced into this week's sharp contraction in the Brent-WTI spread," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

U.S. May gasoline futures fell more than 3 cents to settle at $3.2027 a gallon. In early trade, it dropped nearly 2 percent to a session low of $3.1411 a gallon, the lowest since Feb. 29 for front-month RBOB, and well below its 50-day moving average of $3.2361.

U.S. gasoline's crack spread -- gasoline's value against the price of crude oil -- narrowed more than $2 early in the session to $30.65 a barrel before recovering to close at $31.84, slightly wider than Tuesday's close at $31.63.

© 2018 Thomson/Reuters. All rights reserved.

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Wednesday, 18 April 2012 03:20 PM
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