U.S. Crude Prices Slump on Inventory Data

Reuters

U.S. oil prices edged back below $60 a barrel Thursday, extending losses for a second day after government data showed a surprise increase in inventories of refined fuels such as gasoline.

The benchmark U.S. oil contract was down 40 cents or 0.7% at $59.87 a barrel on the New York Mercantile Exchange. The global Brent contract was down 15 cents or 0.2% at $63.34 a barrel on the ICE Futures Europe exchange.

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Inventory data reported Wednesday by the U.S. Energy Information Administration showed refineries ran at near-maximum capacity last week, drawing down on crude inventories by nearly five million barrels. But all the refinery activity resulted in an increase in fuel products, rather than a decrease as analysts had projected.

Analysts are mixed on the outlook reflected in the data. While the increase was bearish, some said it was the natural result of elevated refining activity, and pointed to other data indicating strong gains in drivers' fuel demand. But the agency's estimate of U.S. oil production edged upward once again to more than 9.6 million barrels a day, showing the market is continuing to be well-supplied with oil.

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"The market seems to be shifting crude oil from inventory into refined products inventory," analyst Dominick Chirichella of the Energy Management Institute said in a note. "Market sentiment remains mixed and slightly biased to the downside."

Globally, market watchers were focused on more potential bearish aspects for supplies, with the looming possibility of a nuclear deal with Iran that could eventually bring up to a million barrels of oil back onto the market.

Analysts were also focused on Chinese customs data showing a decline in crude imports in May; China has been a key source of support for the market, buying oil while it is cheap to stockpile for strategic and commercial reserves, and any evidence of weakening demand there would take away a rare source of market strength. Research consultancy JBC Energy said in a note that storage space in China may be growing limited.

In refined fuel markets, gasoline futures fell 0.2% to $2.0524 a gallon, while diesel futures fell 0.2% to $1.8727 a gallon.