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Oil Little Changed After Falling on Surprise U.S. Supply Gain, Home Sales
By Ann Koh and Ben Sharples - Jun 24, 2010

Crude oil pared earlier losses to trade above $76 a barrel in New York as the dollar weakened for a second day against the euro, increasing the investment appeal of commodities.

Futures dropped 1.9 percent yesterday as the U.S. Energy Information Administration reported crude stockpiles rose more than analysts expected. Sales of new homes declined in May to a record low as a tax credit expired.

“It’s difficult to go higher than $80 a barrel,” said Ken Hasegawa, a commodity derivative sales manager at Newedge Group in Tokyo. “Now is the time for a correction. Still, the price will be driven by how the U.S. dollar fares.”

Crude for August delivery was at $76.32 a barrel, down 3 cents, at 2:54 p.m. Singapore time in electronic trading on the New York Mercantile Exchange. It earlier dropped as much as 42 cents, or 0.6 percent, to $75.93 a barrel. Yesterday, the contract fell $1.50 to $76.35.

The dollar fell to $1.2333 versus the euro as of 6:51 a.m. in London, from $1.2311 in New York yesterday. The U.S. currency declined for a second day as traders increased bets the Federal Reserve will keep interest rates near zero for longer to support a recovery in the world’s largest economy.

Fed officials retained a pledge to keep the benchmark interest rate at a record low and signaled that European indebtedness may harm U.S. growth.

U.S. Supplies

U.S. crude stockpiles rose 2.02 million barrels to 365.1 million in the week ended June 18. Supplies were forecast to drop 800,000 barrels, according to analysts surveyed by Bloomberg News.

Imports of crude climbed 4.3 percent to 10.1 million barrels a day, the highest level since the week ended Jan. 2, 2009, the Energy Department report showed. Fuel imports surged 10 percent to 2.32 million barrels a day.

Gasoline supplies fell 762,000 barrels to 217.6 million last week. An 180,000-barrel drop was forecast, according to the median of 15 responses in the survey.

Refineries operated at 89.4 percent of capacity, up 1.5 percentage points from the prior week and the highest level since April, the report showed.

Brent crude oil for August delivery was at $76.35 a barrel, up 8 cents, at 2:44 p.m. Singapore time on the London-based ICE Futures Europe exchange. Yesterday the contract slipped $1.77, or 2.3 percent, to end the session at $76.27 a barrel.

Slower Demand Growth

The International Energy Agency, an adviser to oil- consuming nations, said in a report yesterday that growth in world oil demand will slow in the next five years as the pace of Chinese consumption moderates.

The IEA estimates that the rate of annual demand growth will shrink each year between now and 2015. Consumption will climb 1 percent to 91.93 million barrels a day in 2015, down from 1.5 percent growth in 2010, according to the Paris-based agency’s Medium-Term Oil and Gas Markets 2010 report.

“Sentiment is still pretty weak,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “On the demand front, it’s still negative and still very uncertain.”

Chinese oil demand is expected to reach 11.63 million barrels a day by 2015, up from 9.16 million this year, according to the IEA data. The pace is slowing, with consumption rising 4.1 percent in 2015, compared with 7.6 percent this year, according to the report.

The rate of consumption decline in developed economies is accelerating. Total demand from the 30 industrialized countries that belong to the Organization for Economic Cooperation and Development will drop 0.9 percent in 2015 compared with a 0.1 percent fall in 2010, the agency estimates.

Storm Conditions

Conditions are ripe for a tropical storm or even a hurricane to develop in the Gulf of Mexico this weekend, a potential threat to gas and oil interests there by the middle of next week, forecasters said.

The storm may also affect BP Plc’s efforts to halt and clean the worst oil spill in U.S. history.

A collection of thunderstorms, also known as a tropical wave, is currently dropping rain on Cuba, Jamaica and Hispaniola and is expected to organize into at least a tropical storm by June 27, said Jim Rouiller, a senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania. If the storm forms, it will be named Alex.

“On the other hand, with the prospect of an economic rebound and the approach of hurricane season in mind, the lower side of crude also has support at $75 a barrel,” said Newedge’s Hasegawa.

Sales of new homes slipped to an annual pace of 300,000 last month from April, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed yesterday in Washington.

“There are still many weak sectors in the U.S. economy,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. “Prices should remain depressed. There could be a bit more room to go to the downside.”

http://www.bloomberg.com/news/2010-06-23/oil-falls-a-third-day-after-surprise-supply-gain-drop-in-u-s-home-sales.html