WTI crude fell for a third day on Wednesday following official data by the U.S. Energy Information Administration, which stated that cure reserves decreased less than expected and gasoline stockpiles rose way more than forecast. Crude reserves fell by 338 000 barrels, compared to a 778 000 barrels decline expectation. Gasoline stockpiles rose 3,02 million barrels, surpassing the expected 22 000 barrels gain. This raised up concerns of a weaker demand during the U.S. driving season with the country being the biggest consumer in the world, responsible for 22% of the global consumption. On the New York Mercantile Exchange WTI crude for July delivery went down 1,88% a barrel and traded at $94,37.
Oil prices are experiencing further pressure by the strengthened greenback after yesterday Ben Bernanke, Fed chairman, said the U.S. may scale back its monetary easing measures in the next few meetings, if the labor market improves further. He said the Quantitative Easing program is currently providing “significant benefits”.
The greenback also increased its value following the release of the Fed minutes yesterday where it came to notice that some policy makers think the stimulus measures should be scaled down in June. Strengthening of the dollar tends to decrease the prices of the dollar-priced commodities as it makes the greenback more attractive for investors. Also a more expensive dollar makes commodity prices costlier for foreign currency holders.
Oil prices were also influenced by the economic data, which came out for China. A preliminary reading of Chinas Purchasing Managers Index for May dropped to 49,6, which is a negative value as 50 is the neutral point. It is the lowest value since October and is below forecasts.
Mark Keenan, director of commodities research and strategy at Societe Generale SA in Singapore said: “China’s PMI data coming in below forecast is adding a strong downdraft across most commodity markets today.The comments from the Fed, hinting at the scaling back of quantitative easing if the economy improves further, have driven the dollar higher, which is also contributing to the general weakness. These factors are driving oil prices lower today.”
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