Oil prices top $104 on sharp inventory decline
BY CARLA MOZEE, MarketWatch
LOS ANGELES (MarketWatch) -- U.S. benchmark crude-oil futures leapt above $104 a barrel after weekly U.S. crude-oil supplies fell by more than twice the amount anticipated by analysts.
Crude oil for August delivery rose 85 cents, or 0.8%, to $104.38 a barrel in electronic trade. Prices also kept hold of gains following the release of weak trade data from China, including a 1.4% drop in first-half oil imports.
The bump up in oil prices beyond the $104 level came after the American Petroleum Institute late Tuesday said crude supplies fell 9 MMbbl for the week ended July 5. A Platts survey of analysts had projected a decline of 3.8 million barrels.
"This is a big shock," said Price Futures Group senior market analyst Phil Flynn. "While most were looking at another drawdown in supply, no one expected this drop."
The trade group' s data came ahead of the more closely watched EIA report. U.S. oil inventory this year had hit record levels, according to the EIA, stoking concerns about lackluster demand.
Also set for assessment on Wednesday will be a monthly oil-market report from the Organization of Petroleum Exporting Countries (OPEC) and minutes from the U.S. Federal Reserve' s most recent interest-rate meeting. Also, Fed Chairman Ben Bernanke was slated to speak to an audience of economists in Boston.
On Tuesday, the International Monetary Fund cut its 2013 and 2014 forecasts for world economic growth, putting a dent in energy-demand prospects. But worries about potential disruption in the Middle East oil sector buoyed oil prices, leaving them higher on the New York Mercantile Exchange by 39 cents at $103.53 a barrel. The settlement was the highest in 14 months.
At least 51 people have died in clashes between Egyptian security forces and supporters of Mohammed Morsi, who last week was ousted as Egypt' s president. Oil prices have topped $100 a barrel and have gained more than 2% since Morsi' s removal from office.
Egypt isn' t a major oil producer, but the deadly violence has raised concerns about supply disruptions at the Suez Canal and the Suez-Mediterranean pipeline, a key hub for oil producers controlled by Egypt.
Egypt' s interim leadership on Tuesday put forth a timetable for making changes to the country' s constitution and holding new elections, but the plan has been rejected by rival groups.
The situation in Egypt "remains fluid," Wells Fargo Advisers international strategist Sameer Samana told clients this week. "While investors may be tempted to chase performance in the energy markets, we recommend holding exposure as part of broad commodity positions, as a positive resolution may lead to a pullback in oil."
Elsewhere in the energy complex, Brent oil shed 4 cents to $107.77 a barrel on ICE Futures.
Dow Jones Newswires