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Oil dips towards $74 on U.S. glut at driving season end
Saudi Arabia raises October official selling prices.
September 6, 2010 11:05 by Reuters
Oil slipped towards $74 per barrel on Monday as the end of the U.S. driving season and high levels of unemployment in the world’s biggest oil consumer raised concerns over the outlook for demand.
The U.S. Labor Day holiday, which marks the traditional end of American summer holidays when gasoline demand peaks, kept volume low in many markets.
The New York Mercantile Exchange (NYMEX), home to benchmark U.S. crude futures also known as West Texas Intermediate or WTI, will combine trades from Sunday, Monday and Tuesday into one trading session, with a single settlement at Tuesday’s close.
U.S. crude for October delivery was down 40 cents at $74.20 a barrel by 0830 GMT, while ICE Brent crude shed 11 cents to $76.78.
“The U.S. (oil futures) complex is coming under considerable pressure from the end of the driving season and the high inventory levels, while bearish employment data continues to undermine hopes of economic recovery,” said David Wech, head of energy studies at JBC Energy in Vienna.
“I don’t see any immediate signs of an upside. All the fundamental factors look very weak,” Wech added.
While U.S. gasoline demand accounts for more than 10 percent of the world’s oil use, U.S. refiners are set to cut the amount of crude they process in coming weeks as they enter autumn maintenance, in preparation to crank up output of winter fuels.
Front-month U.S. crude has traded between $64.24 and $87.15 this year, posting its high in early May and the low later that month as the European credit crisis rattled markets.
Prices have mostly stayed between $70 and $80, a range that OPEC producers say is high enough to foster investment in capacity expansion and low enough to sustain economic recovery.
Asian equities touched one-month highs on Monday but oil investors shrugged off the rally, focusing instead on a report on Friday showing U.S. employment dropped less than expected
The correlation between oil and equities has fallen in the last two sessions as the fundamentals of an oversupplied oil market weigh on sentiment.
Equities markets have focused on hopes for economic growth and supported oil in recent months despite a build in U.S. oil inventories for record levels. U.S. petroleum stockpiles are at their highest level since weekly figures were collated in 1990.
Saudi Arabia raised its official selling prices (OSPs) for benchmark Arab Light and other grades to customers in Asia, the U.S. and Europe in October, state oil company Saudi Aramco said on Sunday.
But many investors are pessimistic on the short-term outlook. Money managers cut net-long positions in crude oil on the NYMEX for a fourth consecutive week, an indication that investors are decreasing bets that prices will rise.
The net-long positions tumbled to 71,495 in the week to Aug 31, the Commodity Futures Trading Commission said on Friday, from almost 134,000 in the week to Aug 3.
(By Christopher Johnson, Additional reporting by Alejandro Barbajosa; editing by Alison Birrane)