WTI falls amid weak U.S. data, inventories report in sight

West Texas Intermediate fell on Tuesday, extending yesterdays steep drop as weak U.S. economic data fueled concern over stalling economic recovery and hurt demand prospects. Brent rose amid threats to supply from the Middle East and North Africa. Investors are looking ahead into APIs report on Tuesday and EIAs crude oil inventories statistics on Wednesday.

On the New York Mercantile Exchange, WTI crude for September delivery traded at $106.63 a barrel at 7:39 GMT, down 0.29% on the day. Prices ranged between days high and low of $107.19 and $106.58 per barrel respectively. Light, sweet crude dropped more than 1% on Monday, the most in a week, extending this weeks decline to over 1.3% after advancing more than 14% during the past four weeks.

Meanwhile on the ICE, Brent oil for September delivery traded at $108.18 at 7:39 GMT, up 0.02% on the day. Prices varied between days high and low of $108.48 and $108.10 per barrel respectively. The European benchmark fell little over 0.2% on Monday, bringing this weeks decline to 0.2% after closing 0.55% lower last week.

West Texas Intermediate retreated on Monday after trading near a 16-month high throughout the day as negative U.S. economic data fueled concern over stalling recovery in the worlds top consumer. The National Association of Realtors reported Existing Home Sales plunged to 5.08 million in June, mismatching projections for a 0.6% rise to 5.25 million. Meanwhile, May’s reading was revised downwards to 5.14 million from 5.18 million, further worsening the situation.

Jonathan Barratt, the chief executive officer of Barratts Bulletin in Sydney, said for Bloomberg: “The economic recovery is now potty. There is no reason for prices to be at these levels. Seasonally, we have these draws in crude stockpiles.”

Meanwhile, oils losses remained limited amid weaker dollar and tension in the Middle East and North Africa that threatenes supplies. The dollar index for September settlement traded at 82.21 at 7:40 GMT, down 0.13% on the day. The contract ranged between 82.17, a freshly hit 1-month low, and high at 82.34. Futures settled little over 0.4% lower on Monday, marking a second straight day of decline and extending this weeks fall to over 0.6%.

Meanwhile, protesters closed off the eastern Libyan port of Zueitina for a sixth day on Monday, demanding jobs. Zueitina Oil Co has a 60 000 to 70 000 barrels per day output but its terminal has the capacity to handle 20% of the countrys oil exports. Global oil supply was also threatened as the family of Egypts recently ousted Islamist President Mohamed Mursi said on Monday it will take legal action against the Egyptian army. Although Egypt is not an oil producer, it controls the Suez Canal and Suez-Mediterranean Pipeline, through which more than 2.2 million barrels of oil per day gets transported from the Middle East to Europe.

Inventories report in sight

Market players are keeping a close eye on APIs report on Tuesday and EIAs crude oil inventories statistics on Wednesday. According to a Bloomberg weekly survey prior to the Energy Informations report, U.S. crude oil inventories are expected to have fallen by 2.5 million to 364.5 million barrels last week, the lowest since January. Gasoline reserves should have risen by 1.5 million barrels and distillate fuel stockpiles probably also added 1.5 million.

The industry-funded American Petroleum Institute is scheduled to release its separate report today, but its information is considered as less reliable since it is based on voluntary information from operators of pipelines, refineries and bulk terminals.

The EIA reported last week that reserves fell by 6.9 million barrels to 367.0 million in the week ending July 12, extending the previous two weeks’ all-time record high decline in inventories. Refineries operated at 92.8% of their operable capacity last week, the highest this year. Crude stockpiles at Cushing, Oklahoma, the delivery point for futures traded at the New York Mercantile Exchange and biggest U.S. storage hub fell by 882 000 barrels to 46.1 million.

Gasoline production decreased, while distillate fuel output increased, averaging 9.0 million and 5.1 million barrels per day respectively. U.S. gasoline stockpiles added 3.1 million barrels last week, standing well above the upper limit of the average range for this week of the year. Distillate fuel inventories increased by 3.9 million and were in the lower half of the average range.

Ric Spooner, chief market analyst at CMC Markets, said for Reuters: “There hasnt been much change in the oil market this morning and it is holding firm. One aspect of that is the U.S. dollar which is clinging on to losses, together with the fact that the market is waiting for more insight. The U.S. production and inventory figures are going to be very interesting this week as the market is looking for gasoline refinery runs to continue improving and for crude oil inventories being drawn down.”