Bloomberg News

Oil Trades Near One-Week Low on Stockpile Gain, Reserves

March 29, 2012

Oil traded near the lowest close in almost a week in New York after stockpiles surged in the U.S., the world’s largest crude consumer, and Western countries discussed tapping emergency reserves.

West Texas Intermediate futures were little changed after falling 1.8 percent yesterday as an Energy Department report showed crude inventories rose the most since July 2010. The U.S. proposed a release from strategic reserves, French Industry Minister Eric Besson said. A White House official said no decision has been made. There is “no rational reason” for prices at current levels and Saudi Arabia would like to see them fall, the kingdom’s Oil Minister Ali al-Naimi said.

“We’ve had a weak demand scenario for some time in the U.S.,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty in Sydney. “Any actual release of strategic reserves would probably take us below $100 a barrel for West Texas.”

Crude for May delivery was at $105.32 a barrel, down 9 cents, in electronic trading on the New York Mercantile Exchange at 3:09 p.m. Singapore time. It dropped yesterday to $105.41, the lowest settlement since March 22. Prices are 6.6 percent higher this year and set for a second quarterly gain.

Brent oil for May settlement on the London-based ICE Futures Europe exchange was at $124.28 a barrel, up 12 cents. The European benchmark contract was at a premium of $18.96 to the West Texas grade. The gap was $18.75 yesterday, the widest based on closing prices in almost two weeks.

Technical Breach

Oil may extend losses in New York after settling below its middle Bollinger Band yesterday, signaling a breach of technical support, according to data compiled by Bloomberg. The lower Bollinger Band, representing the next support level, is around $103.45 a barrel today and coincides with a Fibonacci retracement indicator on the weekly chart. Buy orders tend to be clustered near technical-support levels.

U.S. crude stockpiles rose 7.1 million barrels in the week ended March 23 to 353.4 million, the highest since Aug. 26, the Energy Department report showed. Supplies were forecast to increase 2.6 million barrels, according to the median estimate of 12 analysts surveyed by Bloomberg News. Imports climbed 13 percent, the most in four months.

Gasoline inventories fell 3.54 million barrels to 223.4 million and supplies of distillate fuel, a category that includes heating oil and diesel, declined 711,000 barrels to 135.9 million, according to the report.

Strategic Reserves

France is waiting for a report from the International Energy Agency on inventories before deciding on releasing fuel from emergency stockpiles, Budget Minister Valerie Pecresse said yesterday. The IEA, the energy adviser to 28 countries, coordinated the sale of 60 million barrels of crude and refined products last year after supplies from Libya were disrupted.

The Obama administration hasn’t made a decision and no specific action has been proposed, according to Josh Earnest, deputy White House press secretary. The option “remains on the table,” he said.

Oil has gained this year on speculation Western sanctions aimed at halting Iran’s nuclear program will disrupt Middle East shipments. Negotiations on the nuclear program will resume next month, the Persian Gulf nation’s Foreign Minister Ali Akbar Salehi said yesterday.

“It is the perceived potential shortage of oil keeping prices high, not the reality,” al-Naimi said in an editorial published in the Financial Times, echoing comments he made to reporters on March 20. “There is no lack of supply. There is no demand which cannot be met.”

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net


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