Oil prices down amid rising reserves

Oil prices fell for a third day after the American Petroleum Institute reported yesterday U.S. crude reserves increased the most in four years. According to APIs report, U.S. crude stockpiles gained 8.97 billion barrels during the week ending June 7, gasoline inventories jumped 1 million barrels and distillate reserves rose by 199 000. According to a Bloomberg News survey, the Energy Information Administrations report, due on Wednesday at 14:30 GMT, is projected to report a 1.5 million barrels decline in Crude Oil Inventories, a 500 000 barrels fall in gasoline reserves and a 1.5 million gain in distillate stockpiles.

Natalie Rampono, commodity strategist at ANZ in Melbourne said for Reuters: “U.S. inventories are still relatively high, well above five-year averages anyway, for this time of year.”

On the New York Mercantile Exchange, both WTI crude and Brent oil marked losses for the day. WTI for July delivery traded at $94.52 a barrel at 6:31 GMT, down 0.91% on the day. Prices ranged between days low of $94.47 and high at $95.29.

Brent oil for August delivery stood at $102.38 a barrel at 6:33 GMT, slipping 0.48% on the day. The European benchmark varied between days low of $102.27 and high at $102.83.

Jonathan Barratt, the chief executive officer of Barratt’s Bulletin commented for Bloomberg: “When we look at the bearish factors, we have to look at those inventories. The oil market is moving sideways.” He predicted WTI contracts may drop to $91.40 a barrel.

This comes after on Tuesday OPEC and the IEA cut their global demands forecasts. The group trimmed its expectations for 2013 world demand growth by 10 000 barrels per day to 780 000. Natalie Rampono commented: “The fact that they are making ongoing downgrades, I think thats also weighing on sentiment.”

The U.S. Energy Information Administration reported on Tuesday that it expects shale oil reserves to be around 58 billion barrels, up from 32 billion in 2011. The worlds shale oil reserves currently cover a decades consumption, the EIA said.

The Organization of Petroleum Exporting Countries increased its output in May by 106 000 barrels to a six-month record level of 30.57 million barrels per day, which is still in line with the group’s appointed target on their meeting in Vienna May 31.

Saudi Arabia, OPEC’s biggest oil producer, accounts for most of the group’s output increase, compensating for reduced production from Libya, Nigeria and Iran. Iran’s output fell by 37 700 barrels per day to 2.6 million and Libya experienced a 27 300 barrels decline to 1.4 million. Saudi Arabia increased its production pace by 143 400 to 9.4 million per day.

Oil prices were also pressured by negative China data published over the weekend, which sparked concern about demand from the worlds second biggest oil consumer. China’s industrial output mismatched expectations and rose 9.2% in May, below forecasts. Factory-gate prices dropped for a fifteenth straight month. Chinese exports jumped by only 1% in May and shipments to the U.S. and European Union, the Asian nation’s two biggest export targets, declined for a third straight month. China’s imports were projected to gain 6% but official figures strayed well below and showed a 0.3% decrease, marking a ten-month low.

Consumer inflation shrank to 2.1%, mismatching a 2.9% forecast and Producer Price Index (PPI) tumbled 2.9%, above expectations of a 2.5% decrease. The M2 money supply jumped 15.8%, missing 15.9% expectation. Retail Sales met projections of a 12.9% gain and so did Industrial Production with a 9.2% increase on an annual basis.

All eyes are now pointed at the EIAs weekly Crude Oil Reserves report, due at 14:30 GMT today. It is considered as more reliable than APIs report, which is based on voluntarily information. Values differentiating from projections are considered as one of the main fluctuation factors in global oil pricing.