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Oil down, ECB move on Greece drags after U.S. data


Oil prices drop with equities, euro's slump on Greece worries; U.S. EIA crude stock build smaller than API report; Coming up: U.S. weekly jobless claims, Thursday

May 17, 2012 12:29 by

Crude oil futures fell on Wednesday as a report that the European Central Bank stopped monetary policy operations to some Greek banks sparked further risk aversion.


The reported ECB move erased an uptick in oil prices after U.S. data showed that domestic stockpiles rose much less than what an industry group reported late on Tuesday.


The euro dipped against the U.S. dollar while U.S. equities sharply cut gains on the ECB report, fueling a further sell-off in oil futures.


“One element contributing to the decline in oil prices is general investor risk aversion stemming from euro zone concerns and an increased risk of a general economic slowdown,” said Gareth Lewis-Davies, a senior energy strategist at BNP Paribas.


The ECB has stopped providing liquidity to some Greek banks as they have not been successfully recapitalized, ECB sources said, highlighting the weak state of Greece’s banking sector, as Greeks pull euros out of the banks fearing that their country might leave the single currency.


By 12:20 p.m. EDT (1620 GMT), ICE Brent for June delivery, which is expiring at the close, was down 64 cents at $111.60 a barrel. It hit an early low of $110.41 and had risen to $112.10 in volatile trading.


U.S. June crude was down 86 cents at $93.12, having fallen to $91.81 early, the lowest intraday since Nov. 3, and risen as high as $94.16.


Brent’s premium against U.S. crude widened slightly to around $18.50, from $18.26 on Tuesday, with U.S. crude under pressure after the U.S. Energy Information Administration’s weekly report showed that crude stocks at the Cushing, Oklahoma, delivery point for U.S.-traded crude rose 1 million barrels to a record 45.13 million barrels.


U.S. oil prices briefly swung into positive territory, recovering from session losses of more than $2 after the EIA data showed that crude stocks rose 2.1 million barrels last week, far less than the 6.6 million barrel build shown in the American Petroleum Institute’s report on Tuesday and closer to analysts’ forecasts.


Bigger-than-expected drawdowns in U.S. gasoline and distillate stockpiles were supportive for crude and helped limit losses as four-week average demand rose above last year’s level for the first time this year, the EIA data showed.


“The report is neutral to bullish,” said John Kilduff, partner at Again Capital LLC, New York.


“The trend in falling refined product supplies looks to continue and will support prices overall,” Kilduff added.

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