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Oil Falls For First Day In Three As U.S. Stockpiles Increase

Published: July 26, 2012 | 6:50 am
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Oil dropped for the first time in three days in New York on concern that rising stockpiles signal faltering demand in the U.S., the world’s biggest crude consumer.
Futures slid as much as 0.7 percent, eroding a 0.5 percent gain yesterday. Crude inventories climbed by 2.7 million barrels last week, the first increase in five weeks, data from the Energy Department showed. Supplies were forecast to decline 1 million barrels, according to a Bloomberg News survey. Sales of new U.S. homes unexpectedly decreased in June from a two-year high, a Commerce Department report showed.
“We’re stuck in the $80s until we get a little more confidence around global growth prospects,” Michael McCarthy, a chief market strategist at CMC Markets in Sydney, said in a phone interview. “I would expect, especially given the inventory numbers, oil to gravitate back toward the middle of the $81.50 to $88.50 range over the next few trading days.”
Crude for September delivery fell as much as 59 cents to $88.38 a barrel in electronic trading on the New York Mercantile Exchange and was at $88.56 at 1:26 p.m. Singapore time. The contract yesterday rose 47 cents to $88.97, the highest close since July 20. Prices are 10 percent lower this year.
Brent oil for September settlement on the London-based ICE Futures Europe exchange was down as much as 59 cents, or 0.6 percent, at $103.79 a barrel. The European benchmark crude was at a $15.43 premium to New York contracts. The spread closed at $15.41 yesterday, the widest in seven weeks.

Ichimoku Cloud

Oil in New York has technical support around $86 a barrel, along the lower of two so-called leading span lines that define an “ichimoku cloud” on the daily chart, according to data compiled by Bloomberg. That’s an area where buy orders tend to be clustered. Crude started a descent in early May to an almost nine-month low after falling out of an ichimoku cloud.
Gasoline stockpiles rose 4.1 million barrels in the week ended July 20 to 210 million, the highest in three months, the Energy Department report showed yesterday. Supplies were forecast to drop 1 million barrels, according to the median estimate of 11 analysts surveyed by Bloomberg. The increase followed a 50 percent jump in product imports from a week ago to 2.6 million barrels a day.
The U.S. East Coast imported 964,000 barrels a day of gasoline last week, the most since January, according to the data. Stockpiles were up 1.8 million barrels last week. The area, known as Padd 1, consumes the most motor fuel in the country.
Distillate inventories, a category that includes heating oil and diesel, climbed 1.7 million barrels to 125 million, according to the Energy Department. They were forecast to gain 1.4 million barrels, the survey showed.

U.S. Homes

U.S. home purchases fell 8.4 percent to a 350,000 annual rate, the weakest since January, the Commerce Department reported yesterday. The median estimate in a Bloomberg News survey of 74 economists was 372,000. The decline was led by a record plunge in the Northeast, where the number of properties available last month was the fewest for any June.
Oil pared losses earlier on speculation the U.S. Federal Reserve may take new steps to spur economic growth. Futures rallied the past two days amid concern that unrest in Syria will spread and disrupt fuel supplies from the Middle East.
“Bullish drivers at the moment are indeed stimulus expectations and concerns about spillover of the conflict in Syria to Iran, Iraq and elsewhere in the Mideast,” said Victor Shum, the managing director of IHS Consulting in Singapore.
Brent crude may trade from $100 to $115 a barrel in the week ahead, supported by “much improved” Chinese economic data, Gordon Kwan, head of energy research at Mirae Asset Securities Ltd. in Hong Kong, said today in an e-mailed report. Manufacturing in China, the world’s second-largest oil user, may contract at a slower pace in July, according a survey by HSBC Holdings Plc and Markit Economics on July 24.

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