Wednesday's Commodities Roundup
Posted on Wed, Jun. 18, 2003 Associated Press
NEW YORK - Crude futures fell sharply Wednesday on the New York Mercantile Exchange, as traders dumped contracts following weekly inventory reports that showed a sharp increase in crude-oil inventories from higher imports.
In the week ended June 13, crude stocks notched a 3.9-million-barrel build to 288.3 million barrels, as oil imports rose by 418,000 barrels a day to 10.302 million barrels a day, according to the Energy Information Administration.
The EIA, the Energy Department's statistical arm, says it considers imports above 10 million barrels a day to be extremely high.
The inventory build helped reverse most of a 4.6-million-barrel decline in crude stocks reported last week and was widely seen as bearish by market participants.
Before the EIA report and a similar report Wednesday from the American Petroleum Institute, analysts were divided on whether the data would show a crude build for the week. But even analysts who expected a build estimated an average increase of only 2.3 million barrels.
The greater-than-expected build in crude stocks and imports may keep the market under pressure for the remainder of the week, barring any major news, said John Kilduff, an analyst for Fimat USA Inc. in New York.
"These numbers are solidly bearish on several fronts," he said, adding that more imports from Venezuela likely contributed to the higher import levels.
Bill O'Grady, an analyst for A.G. Edwards in St. Louis, agreed.
"I would suspect we're going to drift down further on the reports," he said. "Imports have really ramped up for crude oil."
He added that while bearish elements of the reports "may just be a one-week event," prices likely will continue to remain pressured by a weak economy.
The API, a trade group, reported crude inventories and imports increased to levels closely mirroring the EIA's.
Light, sweet crude futures for July delivery traded on the New York Mercantile Exchange as low as $29.80 a barrel Wednesday. July futures settled at $30.36 a barrel, down 71 cents.
On London's International Petroleum Exchange, August Brent settled down 52 cents at $26.15 a barrel.
Petroleum products followed crude lower Wednesday, although analysts' reactions to gasoline-inventory data were varied.
While some analysts saw EIA data of an 800,000-barrel drop in gasoline inventories to 209.1 million barrels on an increase in demand as supportive, others pointed out that demand is still too low to effectively undergird prices.
"I think there is some pent-up demand for gasoline," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "As soon as the weather heats up, the demand is going to heat up. I think you'll see a big surge in demand in the coming weeks."
However, A.G. Edwards' O'Grady called gasoline demand "very disconcerting," as it usually climbs beyond 9 million barrels a day during the summer driving season, which traditionally begins in earnest after Memorial Day. The latest EIA report indicated gasoline demand rose 351,000 barrels a day to 8.88 million barrels a day.
Gasoline and heating oil both fell on the Nymex to levels not seen since mid-May.
July gasoline settled at 83.73, down 1.29 cents on the day.
July heating oil settled at 74.48, down 0.71 points on the day.
Natural gas for July delivery fell 13.1 cents to close at $5.581 per 1,000 cubic feet.