UPDATE 9-Oil sags on inventory build, soft data

Wed May 2, 2012 4:41pm EDT

* U.S. crude stockpiles increased for a sixth week
    * Stocks at U.S. delivery point hit record
    * European factory, U.S. private employment data bearish


    By Gene Ramos	
    NEW YORK, May 2 (Reuters) - Crude oil futures fell on
W ednesday, as U.S. crude inventories soared to their highest
level in more than 20 years after rising for the sixth straight
week last week and employment dipped in the United States and
Europe, dimming the outlook for oil demand.	
    The decline reversed the previous session's gains, as the
larger-than-expected crude stock build added to pressure from
earlier data showing U.S. private employers hired fewer workers
than expected in April, and that the euro zone's manufacturing
sector declined further, causing more job losses.
  	
    Also stoking negative sentiment, new orders for U.S. factory
goods posted their biggest decline in three years, though the
latest data was slightly higher than expected.	
    Fears of further price turmoil in the oil markets followed
the recent take-down of a hefty geopolitical premium after Iran
agreed to return to the negotiating table with six world powers
over its disputed nuclear program.	
    U.S. crude oil stocks rose 2.84 million barrels last week to
375.86 million barrels, more than forecast, and hitting the
highest level since September 1990.	
    Domestic crude stocks have ballooned more than 29 million
barrels since late March, the  biggest six-week increase since
February 2009, data from the U.S. Energy Information
Administration showed. 	
    A big portion of last week's increase came from crude stored
at the Cushing, Oklahoma, delivery point for U.S.-traded crude
futures, which soared to a record 42.96 million barrels after
adding 1.2 million barrels last week.	
    In refined products, gasoline stocks slid more than expected
by 2 million barrels to 209.7 million, the 11th week in a row of
declines. In that period, gasoline stocks have fallen 22.5
million barrels or nearly 10 percent. 
    But gasoline demand continued to fall from last week's
level, hitting 4.7 percent on a four-week average, from 4.2
percent in the previous week's report. 	
    "The report doesn't seem to be supportive of a further
rally," said Gene McGillian, analyst at Tradition Energy in
Stamford, Connecticut.	
    In London, ICE June Brent crude settled down $1.46
at $118.20 a barrel. The contract is well below the year's high
of $128.40 reached on March 1. 	
    U.S. crude for June delivery settled at $105.22, the
50-day average, after dropping to session low of $104.91. U.S.
crude has fallen from this year's high of $110.55, also hit on
March 1. 	
    "At current levels, U.S. crude is moving at the middle of
the recent trading range, with resistance lying above $106 to
$109, said Rich Alexander, senior broker at the Zaner Group in
Chicago. 	
    The day's selling pushed Brent crude's total trading volume
about 18 percent from its 30-day average, according to Reuters
data. U.S. crude volume was up nearly 11 percent above its
30-day average.	
    As Brent crude fell harder than U.S. crude, its premium
against U.S. crude narrowed to $12.98 at the close, from $13.50
on Tuesday. The Brent/WTI spread slipped to $12.65 at one point,
the narrowest since Feb. 1. 
  	
    	
   JOBS FRONT	
   Hiring in the U.S. private sector slowed as the ADP National
Employment Report showed 119,000 were added in April, below 
expectations for a 177,000 gain, stoking concerns that the
economy had lost steam.	
    In the euro zone, companies cut workers at the fastest pace
in over two years after new factory orders fell for the 11th
straight month, according to the closely watched Markit Eurozone
Manufacturing Purchasing Managers' Index. [ID: nL5E8G223R]	
    In the U.S., more data from the labor market are awaited,
with weekly initial jobless claims and layoffs in April due on
Thursday.	
    With the blockbuster nonfarm payrolls and unemployment data 
due on Friday, oil investors are turning cautious.	
     A Reuters poll showed that non-farm payrolls likely rose
170,000 last month, after a meager 120,000 addition in March.
The unemployment rate was forecast to hold at a three-year low
of 8.2 percent. [ID: nL1E8G1E9] 	
    	
    CHINA, IRAN FACTORS	
    Concerns about the demand outlook for China, the No. 2 oil
consumer behind the United States, also pressured prices.	
    Data showed that Chinese bank lending dropped 30 percent in
April, from March, as credit demand declined, the official China
Securities Journal reported on Wednesday. 	
    Worries about supply disruption from Iran has eased in the
wake of conciliatory words from Iran and Jerusalem, a factor in 
   	
the recent drop in oil prices.	
    On Wednesday, Iran said it would seek an end to sanctions
over its nuclear activities at talks with world powers on May 23
in Baghdad. However, the U.S. and its allies have made clear
that Tehran must take action to allay fears about its nuclear
ambitions before they can relax the sanctions.
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.