Oil falls after U.S. crude production rises to 20-year high

Fuel Demand

Total fuel consumption rose 5.5% to 19 million barrels a day last week, the most since the week ended Dec. 14, the report showed.

Retail sales in the U.S. rose for a third month in January. The 0.1% climb followed an unrevised 0.5% increase in December, Commerce Department figures showed today in Washington. The slower-paced advance, as an increase in payroll taxes took a bite out of consumers’ paychecks, matched the median forecast of 80 economists surveyed by Bloomberg.

The International Energy Agency reduced its 2013 world demand estimate by 90,000 barrels a day following a weaker growth outlook from the International Monetary Fund.

Global oil use will increase by 840,000 barrels a day in 2013, or 0.9%, to 90.7 million a day. Production among OPEC nations fell to its lowest level in a year, limiting price relief from an increase in spare production capacity, the Paris-based IEA said today in its monthly oil market report.

Iran Inspections

Futures also declined as a team of United Nations inspectors arrived in Iran to negotiate wider access to the Persian Gulf nation’s nuclear facilities.

The International Atomic Energy Agency delegation led by Herman Nackaerts is seeking a deal that would include a visit to the Parchin military site, where nuclear work may have been carried out according to intelligence reports received by the agency.

The U.S. and its allies say Iran may seek to make an atomic bomb, while Iran says it’s pursuing a civilian program. Sanctions aimed at stopping the country’s nuclear program have hindered its ability to export oil.

“Prices fell on speculation that IAEA inspectors will come to an agreement with the Iranian government, reducing tension,” said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. “The IEA report also put some downward pressure on the market because of their reduced outlook for demand.”

Technical Support

Oil in New York may rise to $100 a barrel as demand along the two-year moving average propels futures above technical support, according to Barclays Plc. Buyers have emerged near the $95 level, signaling that the market may test a range of $98.25 to $98.35, the bank said in an e-mailed report.

Electronic trading volume on the Nymex was 621,287 contracts as of 3:27 p.m. It totaled 684,492 contracts yesterday, 30 percent above the three-month average. Open interest was 1.65 million, the most since May 2011.

Bloomberg News

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