Oil Futures Edge Lower on Expectations of Rising Supply

By Nicole FriedmanDow Jones Newswires

NEW YORK--Oil futures eased on Tuesday on expectations that weekly government data would show that U.S. crude-oil supplies rose to near-record highs last week.

Light, sweet crude for June delivery settled down 17 cents, or 0.2%, at $102.44 a barrel on the New York Mercantile Exchange. The June contract expired at settlement on Tuesday. The July contract settled up 22 cents, or 0.2%, at $102.33 a barrel.

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Brent crude on the ICE futures exchange rose 32 cents, or 0.3%, to $109.69 a barrel.

U.S. oil supplies stood at 398.5 million barrels as of May 9, according to the U.S. Energy Information Administration. Domestic oil production has boomed in recent years, helped by new technologies enabling energy producers to access supplies trapped in shale-oil fields.

Analysts expect the EIA to report that stocks rose by 700,000 barrels last week, according to a Wall Street Journal survey.

If the estimate is correct, supplies will stand at 399.2 million barrels, just below the record high of 399.4 million barrels reached in the week ended April 25, according to weekly EIA data.

The closely watched survey from the Energy Information Administration is due at 10:30 a.m. EDT Wednesday.

"If we get the build we're looking for [of one million barrels], we're going to have a record amount in storage," said Gene McGillian, broker and analyst at Tradition Energy in Stamford, Conn. "I wouldn't be surprised if we have a slight pullback."

Gasoline stockpiles are expected to rise by 100,000 barrels in the week, according to the survey, and stocks of distillates, which include heating oil and diesel, are expected to increase by 200,000 barrels.

Refinery use is seen rising 0.4 of a percentage point to 89.2% of capacity, based on EIA data.

Demand for crude oil typically rises at this time of year as refiners conclude seasonal maintenance and ramp up production ahead of the busy summer-driving season.

"With the Memorial Day holiday coming up as the traditional kick-off to the summer driving season, we see potential for a sharp price swing in reaction to any surprises" in the inventory data, said Tim Evans, analyst at Citi Futures Perspective, in a note on Tuesday.

The American Petroleum Institute, an industry group, said late Tuesday that its own data for the same week shows a 10.3-million-barrel drop in crude stocks, according to industry sources. The group also said gasoline supplies rose by 135,000 barrels and distillate stocks increased by 1.4 million barrels, according to the sources.

Oil prices rose slightly in late trading on the news.

Front-month June reformulated gasoline blendstock, or RBOB, settled down 0.06 cent at $2.9640 a gallon. June diesel settled up 0.83 cent, or 0.3%, at $2.9492 a gallon.