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Crude oil inventories drop less than expected

Crude-oil-barrelsAccording to the Energy Information Administrations weekly report, U.S. crude oil inventories fell less than expected in the week ending August 2. Gasoline and distillate fuel gained, confounding analysts expectations.

On the New York Mercantile Exchange, WTI crude for September delivery fell to $104.67 per barrel by 14:37 GMT, down 0.60% on the day. Futures fell by $0.50 minutes after the statistics were released, hitting a new days low at $104.62 per barrel, the lowest since July 31. Days high stood at $105.81. Light, sweet crude settled 0.85% lower on Tuesday, a fourth consecutive daily decline, extending current week’s fall to over 1.8%.

Meanwhile on the ICE, Brent oil for September delivery dropped to $107.56 a barrel at 14:39 GMT, down 0.58% on the day. The European benchmark slipped as much as $0.40 following the release of the report to hit a session low of $107.42. Prices ranged between days high and low of $108.28 and $107.09 a barrel respectively. Futures slipped 0.46% on Tuesday, also a fourth straight daily decline, bringing current week’s fall to 1.1%.

The Energy Information Administration reported on Wednesday that U.S. crude oil inventories fell by 1.3 million barrels, or 0.4%, to 363.3 millionm in the week ending August 2, below but generally in line with economists expectations. Refineries operated at 90.9% of their operable capacity, 0.4% below the preceding weeks 91.3%. Both gasoline and distillate fuel output intensified last week, averaging 9.6 million and 4.9 million barrels per day respectively.

The EIA also said in its report U.S. gasoline stockpiles added 100 000 barrels, or 0.1%, last week and remained above the upper limit of the average range for this time of the year. Meanwhile, distillate fuel reserves increased by 500 000 barrels and continued to stand near the lower limit of the average range. Both of the products defied analysts expectations.

According to a weekly Bloomberg survey of analysts, U.S. crude reserves were expected to have dropped by 1.5 million barrels to 363.1 million, the lowest level since January. Gasoline inventories were supposed to have declined by 500 000 barrels, while distillate fuel stockpiles should have remained unchanged at 126 million barrels.

Oil was pressured earlier in the day on speculation the Federal Reserve might taper its bond purchasing program after the upcoming FOMC meeting as unexpectedly upbeat U.S. data this week offset Fridays weak payrolls reading. Fed Bank of Chicago President Charles Evans, who was one of Quantitative Easing’s supporters, said yesterday that there has been a “good improvement” in the labor market and indicated the central bank’s monetary easing program might be decelerated in September. FOMC’s next meeting is scheduled for September 17-18 when policy makers will review their assessment on the economic recovery pace.

This comes after Federal Reserve Bank of Dallas President Richard Fisher, one of Quantitative Easing’s critics, commented this week the central bank is getting closer to tapering the monetary easing program. He said in a speech in Portland, Oregon: “Financial markets may have become too accustomed to what some have depicted as a Fed ‘put. Some have come to expect the Fed to keep the markets levitating indefinitely. This distorts the pricing of financial assets” and can lead to “serious misallocation of capital.”

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