Oil falls as high inventories weigh

By Gene Ramos

NEW YORK (BestGrowthStock) – Oil prices ended lower on Thursday as total U.S. crude and product stockpiles rose to another 20-year high, prompting investors to sell on risk aversion.

The selling took hold despite government data showing a drawdown in crude inventories last week which surprised most analysts.

U.S. crude futures shot up to a three-week high on news of the drawdown, but gains eroded as traders raised more worries about oil demand with the summer driving season, lackluster for gasoline as it turned out, now over.

Along with oil, most major commodities also dropped, on stop-loss selling after hitting recent highs, traders said.

Oil drew support earlier in the session from reports showing U.S. claims for unemployment benefits fell more than expected last week to a two-month low, while the trade deficit narrowed sharply in July, easing some economic concerns.

U.S. crude for October delivery settled down 42 cents at $74.265 a barrel, after hitting a session high of $75.96, its highest since August 18.

ICE October Brent crude fell 70 cents to end at $77.47.

U.S. crude inventories fell 1.9 million barrels last week, the Energy Information Administration said, much less than the 7.3 million drop shown in industry data on Wednesday and well off the average forecast of a 900,000-barrel increase from analysts polled by Reuters.

The EIA data also showed small declines in distillate and gasoline stocks and a dip in supplies stored at the Cushing, Oklahoma, delivery hub in the week to September 3.

Separately, data from industry data provider Genscape showed that oil inventories at the hub fell by 330,495 barrels to 37.6 million barrels in the week to September 7.

But overall, total U.S. commercial stockpiles rose slightly last week by 200,000 barrels to hit a new 20-year high just above 1.143 billion barrels, the highest level since the EIA began issuing weekly reports in 1990.

“The EIA drawdowns, despite being across-the-board, were minimal and so, overall, I view the latest data as neutral,” said Mark Waggoner, president of Excel Futures in Bend, Oregon.

The Organization of the Petroleum Exporting Countries trimmed its forecast demand for the group’s crude this year and next, denting investors’ confidence that prices would move much above the recent range of $71-$75 a barrel.

Oil investors, as with their counterparts in other commodities markets, have had to deal with worries about a slowing recovery pace in the United States, the world’s biggest fuel consumer.

Those worries further swelled as the Organization for Economic Co-operation and Development, in its latest assessment, said the global economy was slowing more than expected and that monetary stimulus should be extended or stepped up if the slowdown persisted.

The oil market has spent much of the year in lockstep with equities and negatively correlated to the U.S. dollar.

On Thursday, however, oil moved in a different direction as Wall Street was lifted by the day’s jobless clams and trade gap data.

The U.S. dollar was up slightly against a basket of currencies (.DXY: ), helped by the latest U.S. economic data.

(Additional reporting by Robert Gibbons in New York; Marie-Louise Gumuchian, Alex Lawler in London; Alejandro Barbajosa in Singapore; editing by Jim Marshall)

Oil falls as high inventories weigh