Oil dips to session low as U.S. inventories rise above projections

Oil retained its daily losses and fell to session low after the Energy Information Administration reported that U.S. crude oil inventories rose more than expected last week to the highest since June, indicating lingering demand in the worlds top consumer. Motor gasoline and distillate fuel supplies however fell above expectations. Little improvement in Libyas crippled oil exports provided support.

On the New York Mercantile Exchange, WTI crude for delivery in December traded at 97.08 per barrel at 14:42 GMT, down 1.11% on the day. Prices fell to a session low of $96.90 per barrel, the weakest level since October 24, while days high stood at $98.20 per barrel. Light, sweet crude shed 0.9% on Tuesday and extended its weekly decline to over 0.7% on Wednesday.

Meanwhile on the ICE, Brent futures for settlement in December remained on positive territory and traded at $109.40 a barrel at 14:45 GMT, up 0.30% on the day. Prices shifted in a days range between $109.64 and $108.60 per barrel. The European benchmark slid by nearly 0.6% on Tuesday but extended its weekly advance to 1.9% on Wednesday.

Oil prices were pressured after the Energy Information Administration reported that U.S. crude stockpiles rose by 4.1 million barrels in the week ended October 25 to 383.9 million, the most since June. Analysts surveyed by Bloomberg expected an increase of 2.4 million barrels. Refineries utilization rose to 87.3% after it fell to 85.9% last week. U.S. crude oil imports declined by 197 000 barrels per day to 7.5 million from a week earlier.

The EIA also said that both gasoline and distillate fuel production rose last week and averaged 9.4 million and 4.9 million barrels per day, respectively. Total motor gasoline supplies dropped by 1.7 million barrels, outperforming expectations for a 200 000 barrels decrease, and were near the upper half of the average range for this time of the year. Distillate fuel inventories declined by 3.1 million barrels last week and remained near the lower limit of the average range. Participants in Bloombergs survey projected a drop of 1 million barrels.

EIAs report comes after the industry-funded American Petroleum Institute reported on Tuesday that U.S. crude oil stockpiles rose by 5.9 million barrels last week to the highest since June, a sixth consecutive weekly decline. Gasoline inventories added 740 000 barrels, while distillate fuel supplies fell by 2.7 million barrels. API also said that stockpiles at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, rose by 5.9 million barrels compared to analysts’ expectations for a 2.2 million increase.

Fed stimulus outlook

Prices however continued to draw support amid broad expectations FOMCs two-day meeting will conclude today with no change in Feds bond purchasing program. Data released today added to previous overall downbeat employment and manufacturing numbers, supporting those expectations.

Data by ADP Research Institute in Roseland, New Jersey, showed that the U.S. economy created 130 000 jobs in October, confounding expectations for a surge to 148 000. September’s reading received a downward revision to 145 000 from initially estimated at 166 000. This was the first employment data to provide information how the U.S. labor market fared during the 16-day government shutdown that began on October 1.

A separate report today showed consumer prices marked a modest gain in September but the underlying inflation remained benign, providing the Federal Reserve with additional room for monetary easing as it generally targets 2% inflation. The Consumer Price Index gained 0.2% last month, matching forecasts and beating August’s 0.1% advance. Year-on-year, consumer prices jumped 1.2% and matched predictions but underperformed the preceding month’s 1.5% surge. Most of the advance was due to a 0.8% rise in energy prices, which rebounded from August’s 0.3% contraction, while food prices remained unchanged, the weakest reading since May.

Stripping out the volatile energy and food components, core consumer inflation (Core CPI), inched up 0.1% last month, the same as in August but below analysts’ expectations for a 0.2% advance. Year-on-year, core consumer prices rose by 1.7%, trailing both forecasts and last month’s 1.8% advance. The annual reading fell to a two-year low of 1.6% in June which was later followed by announcements from Fed officials who hinted for concern over deflation and its impact on the fragile economic recovery.

Libyan output

Also providing support to prices, Libyas oil output and exports remained curbed by protests followed by little improvement on Wednesday. A spokesman of the state-run National Oil Corp. said on October 28 that output fell to between 250 000 and 300 000 barrels per day after remaining stable at 600 000 bpd for over a month. Exports fell to 90 000 bpd, or a tenth of capacity, from Al Jurf and Bouri, the two offshore oil platforms.

At the same time, eastern ports were showing no signs of re-opening. Output from the Brega oilfields fell to as low as 20 000 bpd, crippling exports from the Brega port.

Moftah Alamin, a spokesman for Tuareg protesters, said for Bloomberg yesterday that Libya wasnt able to restart its Sharara field, leaving its 350 000 barrels-per-day capacity offline.