U.S. oil futures slipped below $100 a barrel for the first time in a week as expectations mounted for an 11th straight weekly increase in domestic crude stockpiles, and a handful of other ancillary factors weighed on the market.
Oil futures for May delivery fell $1.84, or 1.8%, to settle at $99.74, ending the day below $100 a barrel for the first time since March 25 in its second straight losing session. Prices for the global Brent oil benchmark fell $2.14, or 2%, to $105.62 on the ICE Futures Europe exchange, a new low for the year. Both contracts are about 5% below their highs set early last month.
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U.S. oil stockpiles are to rise by 700,000 barrels in the week ended March 28, according to a consensus estimate of analysts surveyed by The Wall Street Journal. Such an increase, while modest, would mark yet another in a long string of supply increases, and has some in the market beginning to question whether there is adequate storage capacity to hold the mounting supplies -- or enough demand to eventually bring it back down.
A major factor supporting the market has been continued drawdowns on supplies at the delivery point for the U.S. benchmark contract in Cushing, Okla., as refiners move that crude to the Gulf for processing. If those draws begin to slow down significantly, it would signal declining demand and remove that support.
"At some point there just might not be an appetite for additional crude oil inventory," said Citigroup Inc. analyst Tim Evans.
Late Tuesday, the American Petroleum Institute, an industry trade group, released the results of its own oil inventory analysis, finding nationwide crude stockpiles fell by 5.8 million barrels last week, including a 1.5 million decline at the Cushing delivery point. It said gasoline stocks rose by 180,000 barrels, distillate stocks--such as heating oil--fell 170,000 barrels, and refinery runs increased to 87.5% of capacity.
Meanwhile, other factors that had contributed to oil's rise were shifting. Russia's assertion Monday that it was withdrawing troops from its border with Ukraine took away some of the so-called risk premium that pushed prices up, though officials with the North Atlantic Treaty Organization said Tuesday they had not yet seen evidence of a withdrawal.
And reports from China and the U.S. painted a tepid picture of economic growth, and energy demand by implication: weak and conflicting data on China's purchasing manufacturing index, and a weak increase in a U.S. manufacturing index that missed expectations.
"There's a little bit of money on the table and people are taking it off," said Pete Donovan, a trader with Vantage Trading on the Nymex floor.
Front-month May reformulated gasoline blendstock, or RBOB, fell 4.82 cents, or 1.7%, to settle at $2.8697 a gallon. May diesel declined 4.2 cents, or 1.4%, to $2.8878 a gallon.
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