Crude Oil Settles Sharply Lower

West Texas crude for July delivery loses more than $4 a barrel at the New York Mercantile Exchange. Earlier, it rose following bullish inventory data.
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Updated from 12:01 p.m. EDT

Oil futures had a volatile session Thursday, initially falling on overnight strength in the U.S. dollar and then rising following bullish inventory figures before again turning lower.

West Texas crude for July delivery settled down $4.41 at $126.62 a barrel at the New York Mercantile Exchange. Brent crude lost $4.04 at $126.89 a barrel, and reformulated gasoline eased 4 cents to $3.40 a gallon.

After losing roughly $2 a barrel near the open of the trading session, crude futures bounced $3 in a matter of seconds upon the release of the latest oil inventory report by the Energy Department. However, the gains were short-lived, and crude began to pull back.

The report from the Energy Information Administration showed that domestic oil stocks, excluding those held in the strategic petroleum reserve, fell by 8.8 million barrels during the week ended May 23. According to a

Bloomberg

census, analysts were expecting that oil inventories would remain unchanged during the week.

After last week's fall in oil inventories, total domestic stockpiles are now in the lower half of their average range for this time of year, according to the EIA.

The agency laid the blame for the decline on delays in crude oil tanker off-loadings at Gulf of Mexico terminals. There are strict guidelines dictating which tanker shipments can be included in the current report and which must wait for the following week. Because such bureaucratic wrangling often interferes with interpretations of the data, many analysts say that year-on-year inventory comparisons are more insightful than are week-on-week comparisons.

Among other energy products, motor gasoline stores fell by 3.3 million barrels during the week, whereas they were also expected to be unchanged. Distillate stores grew 1.6 million barrels, around 600,000 barrels more than analysts had forecast.

Natural gas stores rose by 87 billion cubic feet during the week, in line with estimates.

Meanwhile, energy stocks were mixed.

BP

(BP) - Get Report

slipped 0.9% at $72.05,

ConocoPhillips

(COP) - Get Report

was off 1.7% at $90.96, and

Exxon Mobil

(XOM) - Get Report

was down 1.2% at $89.35.

Among E&P firms,

Apache

(APA) - Get Report

slid 4.2% to $133.16,

Anadarko

(APC) - Get Report

was 3.1% lower at $74.64, and

Plains Exploration

(PXP)

dropped 4.1% to $70.80.

The

U.S. Oil Exchange Fund

(USO) - Get Report

, an exchange-traded fund that closely tracks price movements in West Texas crude futures contracts, gave back 3.5% at $102.26.