Crude Oil Is Little Changed After Falling on Weak Fuel Demand

Thursday, 02 July 2009 10:23

Crude oil traded little changed after falling in the past two days, as demand for gasoline and diesel in the U.S. remained weak during the recession.

Fuel demand in the world’s largest energy user in the four weeks ended June 26 fell 5.8 percent from a year earlier, according to a Department of Energy report yesterday. Demand for distillate fuel including heating oil and diesel fell 9.4 percent to 3.4 million barrels a day during the period.

“Distillate demand is weak, and inventories are very high at the moment, especially in the West,” said Yingxi Yu, a Singapore-based analyst at Barclays Capital. “The products just don’t have the strength to support any further increase in” refining margins, she said.

Crude oil for August delivery was at $69.09 a barrel, down 22 cents, on the New York Mercantile Exchange at 12:48 p.m. Singapore time. Prices had risen as much as 43 cents to $69.74. Yesterday, the contract fell 58 cents, or 0.8 percent, to settle at $69.31. Prices are up 55 percent this year.

Supply from the Organization of Petroleum Exporting Countries increased for a third month in June, a Bloomberg News survey showed yesterday. Oil output averaged 28.23 million barrels a day last month, up 55,000 from May, according to the survey of oil companies, producers and analysts. The 11 OPEC members with quotas, all except Iraq, pumped 25.86 million barrels a day, 1.015 million more than their target.

Oil Inventories

Oil in New York increased 41 percent last quarter, the biggest gain since 1990, as rebounding world equity markets and a weaker dollar encouraged investors to buy the commodity.

“There is less concern about a full-blown recession,” Yu said. “The expectations are that the worst is behind us.”

Crude oil supplies fell 3.66 million barrels to 350.2 million, the Department of Energy said yesterday. Inventories have dropped 15.8 million barrels in the past four weeks, the biggest four-week decline in a year. Stockpiles last week were 8 percent higher than the five-year average for the period, the department said.

Stockpiles of distillate fuel in the U.S. gained 2.9 million barrels to 155 million, the highest since 1987.

Gasoline stockpiles increased 2.33 million barrels to 211.2 million in the week ended June 26, the Energy Department said in a report yesterday. Inventories were estimated to rise by 2 million barrels, according to a Bloomberg News survey.

Refinery Rates

“Refinery rates are still sitting around 87 percent,” said Mark Pervan, a commodity strategist at ANZ in Melbourne. “That is indicating gasoline demand is reasonably healthy.”

Refineries operated at 87.1 percent of capacity in the week ended June 26, down 0.6 percentage point from the previous week, according to the DOE report. Gasoline consumption averaged 9.17 million barrels a day, rising 0.9 percent on better demand in the driving season.

Gasoline for August delivery fell as much as 0.9 cent to $1.85 a gallon in New York.

Brent crude oil for August settlement declined as much as 35 cents, or 0.5 percent, to $68.44 a barrel on London’s ICE Futures Europe exchange. It was trading at $68.58 a barrel at 12:52 p.m. in Singapore.

Source: Bloomberg