Oil halts six-day rally amid growing supply

08:08, April 08, 2010      

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Oil prices halted a six-day rising streak and retreated to below 86 U.S. dollars a barrel on Wednesday as growing fuel supply signaled a still weak demand.

Light, sweet crude for May delivery fell to as low as 85.75 dollars a barrel before settling at 85.88 dollars a barrel on the New York Mercantile Exchange, trading down 96 cents.

Crude futures reached 87.09 dollars before retreating to settle at 86.84 dollars a barrel on Tuesday, marking both highest trading and closing prices since early October, 2008. Oil prices rose by 6. 84 dollars, or 8.55 percent in the six sessions prior to Wednesday.

But the rally lost steam on Wednesday, pressured by both a rising dollar and a larger-than-expected increase in crude inventory.

Concerns over Greece debt problem sent the euro falling, and the dollar was up around 0.3 percent against a basket of currencies. Usually a strengthening green back limits the appeal of commodities like crude as an alternative investment.

More downward pressure came from the weekly inventory report from the Energy Department Energy Information Administration (EIA), which showed another buildup in the crude supplies.

During the week ended on April 2, U.S. commercial crude stockpiles increased by 2.0 million barrels to 356.2 million barrels, the highest level since mid-June 2009. It was the 10th consecutive weekly increase and the gain was larger than analysts' average forecasts.

Meanwhile, distillates, which include heating oil and diesel, rose by 1.1 million barrels to 145.7 million barrels, logging the first gain in 10 weeks. The market had expected a decline of 1.2 million barrels.

The EIA report echoed a separate report from trade group the American Petroleum Institute (API), which reported a 1.1-million- barrel build in crude oil stocks last week after the market closed on Tuesday afternoon.

The EIA report also showed that U.S. imports of crude oil increased by an average of 501,000 barrels a day last week. Fuel imports climbed 7.5 percent to 2.76 million barrels, the highest level since the week ended on Feb. 5.

Refineries operated at 84.5 percent of capacity, the highest rate since the week ended on Oct. 2, the report said. The gain in refinery operating rates has coincided with a drop in the profit margin for refining crude.

One bright spot of the EIA report is that gasoline stocks fell to 222.4 million barrels last week. The weekly drop of 2.5 million barrels is much more than the 800,000 barrels analysts had expected. Many believed that energy demand may pick up as the summer driving season is coming.

In London, Brent crude for May delivery fell 56 cents to settle at 85.59 dollars a barrel on the ICE Futures Exchange.

Source: Xinhua


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