Crude Oil Futures Sink on Inventory Build
Crude futures sold off Wednesday after the Energy Department reported that domestic oil stockpiles grew more than analysts were expecting and the dollar came under pressure.
West Texas crude for June delivery lost $2.17 to $113.36 a barrel on the New York Mercantile Exchange. Brent crude fell $1.53 to $111.90 a barrel.
Reformulated gasoline shed a penny to $2.93 a gallon, while heating oil gave back 5 cents to $3.19 a gallon. Near-term natural gas slipped 2 cents to $10.82 per million British thermal units.
Crude inventories for the week ended April 25 showed a surprise move to the upside, as domestic stores jumped by 3.8 million barrels. Analysts were expecting a 1-million-barrel build, according to a
Bloomberg
survey.
Nevertheless, at 313.9 million barrels, crude inventories remain below the lower half of the average range.
Finished gasoline stocks fell by 1.5 million barrels, nearly twice the draw that had been forecast. Distillate stores gained 1.1 million barrels, well above the 250,000-barrel draw that analysts had estimated. The report showed that gasoline demand grew 0.4% compared with the same period last year.
The increase in domestic crude stockpiles alleviated some of the pressure on oil supplies that has intensified in recent weeks. A strike at a
BP
(BP) - Get Report
refinery in Scotland threatened to shut in a critical oil pipeline in the United Kingdom last weekend, and recent rebel attacks on oil installations in southern Nigeria have reduced oil exports from the country.
Also affecting crude prices the move by the
Federal Reserve
to cut its benchmark lending rate by 25 basis points to 2%. Falling interest rates tend to weigh on the value of the U.S. dollar. In turn, the price of oil tends to climb when the greenback falls because oil is denominated in U.S. dollars in the global marketplace.
While the dollar's value fell against most major international currencies Wednesday, it has recently displayed signs of new life, spurring Wall Street chatter that it may have bottomed out, at least temporarily, after a brutal long-term slide.
Crude has reacted to the dollar's recent gains by retreating from its all-time high of $119.93, and sentiment among some oil traders is turning bearish.
Dennis Gartman, publisher of The Gartman Letter, wrote in a research note that "we suspect that the energy market is simply in liquidation mode; that the long-only ETFs are too long of energy in all forms; that strength in the U.S. dollar is weighing upon commodities and generally upon energy specifically; and that prices are likely to weaken materially for some while longer."
He added that a test of $107 to $110 a barrel for oil "is reasonable as late longs liquidate out and as latent bears become enthusiastic once again."
Among energy stocks,
ConocoPhillips
(COP) - Get Report
rose 0.8% to $86.15,
Chevron
(CVX) - Get Report
advanced 1.5% to $96.15, and
Exxon Mobil
(XOM) - Get Report
climbed 1.4% to $93.07.
In the oil-service space,
Baker Hughes
(BHI)
jumped 1.8% to $80.88,
Halliburton
(HAL) - Get Report
rose 2.1% to $45.91, and
Schlumberger
(SLB) - Get Report
added 1.3% higher to $100.55.
Hess
(HES) - Get Report
said its first-quarter profits doubled, but shares ended little changed.