Oil prices retain losses on U.S. inventories data, Fed stimulus outlook

Both West Texas Intermediate and Brent benchmarks remained on negative territory in early American trading after the Energy Information Administration reported that U.S. crude oil inventories rose more than expected last week, while motor gasoline and distillate fuel supplies fell. Broad expectations that the Federal Reserve will refrain from trimming its monetary easing program until 2014 underpinned the market.

On the New York Mercantile Exchange, WTI crude for delivery in December fell by 0.87% to $100.23 per barrel at 14:55 GMT. Prices held in range between day’s high of $101.22 and low at $99.81 per barrel, the weakest level since July 1. The American benchmark fell by 1% last week after retreating 1.8% in the preceding five-day period.

Meanwhile on the ICE, Brent futures for December settlement traded at $109.81 a barrel at 14:55 GMT and shifted in a day’s range between $110.18 and $109.21 per barrel. The European benchmark added nearly 1% on Friday but settled the week 0.8% lower.

Oil prices continued to edge lower on Monday after the Energy Information Administration reported that U.S. crude oil inventories rose by 4.0 million barrels in the week ended October 11, reaching the highest level in three months at 374.5 million barrels. Analysts surveyed by Bloomberg expected a 3 million gain. Refineries utilization rose to 86.2% from 86% in the week ended October 4, defying projections for a drop to 85.5%. U.S. crude imports averaged 8.0 million barrels per day, down 39 000 bpd from a week earlier.

The government agency also reported that both motor gasoline and distillate fuel production increased in the week ended October 11, averaging 9.3 million and 4.8 million barrels per day respectively. Motor gasoline inventories fell by 2.6 million barrels but remained above the upper range for this time of the year, beating analysts expectations for a drop of 1 million barrels. Distillate fuel supplies decreased by 1.8 million barrels and remained near the lower limit of the average range but underperformed projections for a 2 million drop.

Inventories at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts rose by 366 000 barrels to 33 million, the first increase since July.

The industry-funded American Petroleum Institute reported last Wednesday that U.S. crude oil supplies rose more than projected in the week ended October. Inventories added 5.94 million barrels, underperforming expectations for a 2.2 million increase according to a Reuters poll. Motor gasoline supplies fell by 2.21 million barrels last week, API said, while distillate fuel reserves declined by 1.32 million barrels. API’s statistics are based on voluntary information from operators of pipelines, refineries and bulk terminals and are considered as less reliable than EIA’s numbers.

Also fanning negative sentiment, a report by the National Association of Realtors showed on Monday that U.S. existing home sales fell by 1.9% to an annual rate of 5.29 million units, while prices rose at the slowest pace in five months. This was another sign that the high mortgage rates have begun to slow down the housing market recovery. Augusts reading received a downward revision to 5.39 homes resold from initially estimated at 5.48 million. Economists surveyed by Reuters expected a 2.9% fall to 5.3 million units sold.

The oil market however drew support on broad expectations that the Federal Reserve will delay trimming its monetary stimulus program until 2014. A senior Federal Reserve official said on Monday that it will be tough for the central bank to take a decision to start scaling back its bond purchases in December, given the lost output during the 16-day government shutdown and the revisit of the same issues in February.

Chicago Fed President Charles Evans said for CNBC: “October is a tough one. December? I think we need a couple of good labor reports and evidence of increasing growth, GDP growth. It is probably going to take a few months to sort that one out. It is very difficult to feel confident in December given that were going to repeat part of what just took place in Washington.”