Oil fell below $77 a barrel for the first time this month after U.S. fuel stockpiles rose more than forecast, adding to signs that economic growth is slowing in the world’s biggest consumer of crude.
Oil dropped a third day after a report showed that initial jobless claims in the U.S. unexpectedly climbed to a five-month high. Yesterday the Energy Department said gasoline supplies reached the highest level for the weekly reporting period in at least 10 years. The U.S. June trade deficit unexpectedly widened and China’s industrial output grew by the least in 11 months.
“There’s an overall impression that we might be headed into a difficult period, and that’s dragging down sentiment for oil,” said Thina Saltvedt, a commodities analyst at Nordea Bank AB in Oslo. “We need some more positive macro news to support prices at $80, and based on the latest numbers from the U.S. and China, I think that might be tough.”
Crude for September delivery dropped as much as $1.71, or 2.2 percent, to $76.31 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since July 28. It was at $76.37 at 12:43 p.m. London time. Brent crude for September fell $1.64 to $76 a barrel on the London-based ICE Futures Europe Exchange.
Yesterday, oil closed at $78.02 in New York, the lowest settlement since July 2, after the Energy Department said U.S. gasoline supplies rose for a seventh week, by 409,000 barrels to 223.4 million. Stockpiles were forecast to increase 250,000 barrels, according to the Bloomberg News survey.
“The U.S. inventory report was bearish, showing that there wasn’t much of a summer driving season again,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “Global economic concerns are becoming the top-of- mind issue, so we’ve seen equities pull back. China is showing signs of weakness in growth.”
Stockpiles of distillates such as diesel increased to the highest since January 1983. Inventories of distillate fuel, a category that includes heating oil and diesel, climbed 3.46 million barrels to 173.1 million. Analysts projected a 1.75 million-barrel increase.
U.S. refineries operated at 88.1 percent of capacity, down 3.1 percentage points from the prior week, the Energy Department report showed. Crude supplies declined 2.99 million barrels to 355 million. Analysts forecast a 2 million-barrel drop.
The U.S. trade deficit unexpectedly widened in June to $49.9 billion, Commerce Department figures showed yesterday, the highest level since October 2008, as consumer goods imports rose to a record and exports declined.
China’s year-on-year industrial production growth slowed to 13.4 percent in July, the statistics bureau said in Beijing yesterday. In June, the increase was 13.7 percent. July’s rate was the smallest since August last year after excluding distortions caused by holidays at the start of each year.
Federal Reserve policy makers announced steps on Aug. 10 to bolster an economy that it said is starting to weaken. The Fed’s Open Market Committee said in a statement that “the pace of economic recovery is likely to be more modest in the near term than had been anticipated.”
The U.S. dollar strengthened to $1.2845 against the single European currency after slipping earlier to $1.2933, making dollar-priced assets appear cheaper to investors using other currencies.
To contact the reporters on this story: Christian Schmollinger in Singapore at email@example.com; Grant Smith in London at firstname.lastname@example.org