Oil prices drop
Oil fell on Tuesday, retracing part of the previous session’s gain, as investors reversed bets in the face of a stronger dollar and forecasts for rising crude inventories in top consumer the United States.
U.S. crude for November fell 49 cents to $82.59 a barrel by 0550 GMT, after climbing 2.25 percent on Monday, the biggest percentage gain in two weeks, while ICE Brent for December declined 64 cents to $83.73.
The dollar rose by almost 0.6 percent against a basket of currencies on Tuesday after U.S. Treasury Secretary Tim Geithner said his country would not engage in competitive devaluation.
“The biggest problem that we’ve got is that whenever we get comments about stimulus, the kneejerk reaction is quite simple: sell the dollar and the price of commodities goes artificially higher, driven by sentiment,” said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.
“But it’s a self-defeating attitude because commodities have to be priced to clear. The economies are not good and there is no immediate demand. If there was, why would we need more stimulus?”
A Federal Reserve report on Monday said U.S. industrial production fell in September, against analyst expectations it would rise, while capacity utilization eased slightly. The report was viewed as supportive of expectations for more monetary easing.
U.S. gasoline consumption fell 1.1 percent in the four weeks to October 8 from a year earlier, while the nation’s total oil demand rose just 0.8 percent, government statistics showed.
PRODUCTS MARKETS TIGHTEN
Although oil product markets were seen tightening due to maintenance at American refineries and strike-idled plants in France, U.S. crude stockpiles probably rose by 1.6 million barrels last week, a Reuters survey showed, for their second gain in three weeks, as imports rose with operations at the Houston Ship Channel returning to normal.
U.S. inventories of distillate fuel. including heating oil and diesel, probably fell by 1 million barrels last week, according to a Reuters poll ahead of industry group the American Petroleum Institute’s (API) weekly supply statistics on Tuesday at 2030 GMT, to be followed by government statistics from the Energy Information Administration (EIA) on Wednesday.
Analysts attributed the decline, which would be the fourth in as many weeks, to lower production with refineries in seasonal maintenance, and a potential increase in demand as distributors probably restocked.
Gasoline inventories may have also dropped in the week to October 15 to post their fourth consecutive weekly drop, down by 1.1 million barrels according to the poll, partly as imports from Europe slow because of walkouts at French refineries.
France began to tap emergency fuel reserves at the start of a second week of action by refinery and port strikers as a growing number of petrol stations began to run dry on Monday.
Nationwide strikes over pension reforms have spread to the country’s 12 oil refineries over the past seven days, adding to the impact of a three-week-long strike at France’s largest oil port, Fos-Lavera, over working conditions and a port reform.
U.S. gasoline and heating oil futures, the distillate benchmark, also rose 2 percent on Monday as the French strikes continued to hit fuel production.
Japan’s Nikkei posted modest gains on Tuesday, with banking shares higher after Citigroup reported stronger-than-expected profits, but the yen’s continued strength weighed on the marke
Source: Reuters