Oil falls for third day
Crude oil fell for a third day on concern China may cut back on industrial investment, slowing demand for fuels in the world’s second-largest energy user.
Oil traded below $72 a barrel after China said it was studying curbs on overcapacity in industries including steel and cement. U.S. crude inventories unexpectedly rose last week, according to an Energy Department report yesterday.
“There is the risk of commodities demand slowing down in China,” said Daniel Liu, an energy strategist at futures broker MF Global Pte in Singapore. “China is a big commodities consumer, so commodities are very sensitive to the Chinese economy.”
Crude oil for October delivery fell as much as 40 cents, or 0.6 percent, to $71.03 a barrel on the New York Mercantile Exchange, and traded at $71.17 at 1:01 p.m. Singapore time. Yesterday, the contract dropped 62 cents, or 0.9 percent, to settle at $71.43. Futures have gained 60 percent this year.
Oil also traded lower as the dollar advanced for a fourth day against the euro, making commodities less attractive as alternative investments.
The dollar traded at $1.4247 versus the euro at 12:51 p.m. in Singapore from $1.4255 yesterday in New York.
Brent crude oil for October settlement declined as much as 53 cents, or 0.7 percent, to $71.12 a barrel on the London ICE Futures Europe Exchange, and traded at $71.28 at 1:04 p.m. Singapore time.
The Chinese government said yesterday that it will also increase “guidance” over parts of the coal, glass and power industries, the State Council said on its Web site.
Crude Supplies
U.S. crude inventories rose 128,000 barrels last week, the department said yesterday in a report. Refinery runs fell 21,000 barrels to 14.5 million, while utilization rates were unchanged at 84 percent, the Department of Energy said.
“There are only two more weekends remaining in the summer driving season,” Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania, said in his daily note to clients. “After that, refineries will then head into fall turnarounds. In other words, weak demand to boil oil is about to get even weaker.”
The industry-funded American Petroleum Institute reported Aug. 25 that crude stockpiles rose 4.35 million barrels last week. The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Labor Day
“The API numbers and then the EIA numbers took a bit of the strength out of the market,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “Oil demand hasn’t really shown too much improvement and that will always provide some downside risk to a market that really has been pre-emptive in the past six to nine months.”
U.S. travel during the Labor Day weekend will fall 13 percent from last year because the holiday ends later than usual, the Automobile Association of America, the country’s biggest motoring organization, said yesterday. Labor Day falls on Sept. 7. Last year it was on Sept. 1.
Valero Energy Corp. said its Aruba refinery, the third- largest in the Caribbean, will be closed indefinitely and “nearly all” the remaining contract workers fired. The refinery stopped production July 16.
Valero, the largest U.S. refiner, notified workers yesterday that the shutdown will continue because the economic situation hasn’t improved, Bill Day, a company spokesman, said in an e-mail. None of the refinery’s 780 Valero employees have lost their jobs, Day said. Valero has sought to sell the plant.
Nigeria Output
Nigerian oil production has risen to 1.7 million barrels a day from 1.2 million following an improvement in security in the oil-producing Niger Delta region, Petroleum Minister Rilwanu Lukman said yesterday.
Nigeria is content with oil prices between about $70 and $80 a barrel, he said. Lukman declined to say what action he will recommend the Organization of Petroleum Exporting Countries take when the group meets Sept. 9 to discuss production quotas.
Source: Bloomberg