Ample supply, rising dollar put oil at two-month low
Oil dropped to the lowest close in more than two months as the U.S. heads toward the end of the summer driving season with ample inventories.
Futures fell 1.3 per cent in New York. U.S. crude and gasoline supplies are at the highest seasonal levels in at least two decades, government data shows. Record June demand of the fuel wasn’t enough to make a dent in stockpiles that ended the month at the highest since 1984 for this time of year, the American Petroleum Institute said.
The summer driving season ends Labour Day, Sept. 5. Oil also slipped as the dollar rose to a more than seven-week high.
Oil has fluctuated between about US$44 and $52 a barrel since early June after almost doubling from a 12-year low in February as supply disruptions from Nigeria to Canada and falling U.S. output trimmed a global surplus. While American crude stockpiles slid for a record ninth week through July 15, they still remain more than 100 million barrels above the five-year average.
“The bullish sentiment that pushed oil above $50 has evaporated,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “We have massive crude inventories and more than ample fuel stockpiles as we near the end of the summer driving season.”
West Texas Intermediate for September delivery fell 56 cents to settle at $44.19 a barrel on the New York Mercantile Exchange. It’s the lowest close since May 9. Prices declined 3.8 per cent this week.
Brent for September settlement dropped 1.1 per cent to $45.69 a barrel on the London-based ICE Futures Europe exchange. Prices slipped four per cent this week. The global benchmark closed at a $1.50 premium to WTI.
The Bloomberg Dollar Spot Index increased as much as 0.5 per cent. A stronger U.S. dollar reduces the appeal of dollar-denominated raw materials to investors.
U.S. crude inventories dropped by 2.34 million barrels last week to 519.5 million, the EIA reported Wednesday. Gasoline stockpiles rose to 241 million barrels, the highest level since April, as refineries bolstered operating rates to the highest this year.
“We’re going from a crude glut to a refined product glut,” said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Fla. “Crude supplies have eroded for nine straight weeks, but are still well ahead of where they were a year ago.”
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