Oil futures drop for fifth straight session

CHICAGO (Sept 25)  Oil futures dropped for a fifth straight session on Wednesday after a weekly report showed a surprise climb in U.S. crude supplies.

Crude oil for November delivery  to settle at $102.66 a barrel on the New York Mercantile Exchange. That was the lowest settlement for a most-active contract since July 3, though the November contract last traded below $103 in early August, FactSet data show.

Trading was choppy, with prices eventually ending near the day’s low and close to support levels, said John Macaluso, research analyst at Tyche Capital Advisors. Nymex crude is likely to continue to test its support level of $102.68, he said, adding that he wouldn’t be surprised if prices fall close to $100 as the market approaches the end of the third quarter.

Prices early Wednesday had traded higher at around $103.45 before the supply data were released, buoyed by stronger-than-expected U.S. orders for big-ticket items.

Giving up earlier gains by the close, November Brent Crude the European benchmark for crude oil, shed 32 cents, or 0.3%, to $108.32 a barrel on ICE Futures.

The U.S. Energy Information Administration said that crude stockpiles for the week ended Sept. 20 rose 2.6 million barrels. Analysts polled by Platts were looking for a decline of 1.5 million barrels.

In commentary, Platts editors Jeff Mower and James Bambino attributed the unexpected rise in weekly crude supplies to lower refinery runs and higher imports. But despite the drop in refinery runs, they said, gasoline stocks remain well supplied — at almost 5.5% above the EIA five-year average.

Gasoline supplies rose by 200,000 barrels, while distillate stockpiles were down 200,000 barrels, the EIA said. Gasoline stockpiles were expected to fall 1.5 million barrels, while forecasts called for a decline of 1 million barrels for distillates.

Among the petroleum products, October gasoline rose almost 1 cent, or 0.5%, to $2.67 a gallon. October heating oil was at $2.97 a gallon, also up 1 cent, or 0.4%.

The build in crude and gasoline supplies “show that demand is weaker than expected,” said Macaluso.

Late Tuesday, the American Petroleum Institute data reportedly showed a small dip in crude supplies along with unexpected rises in gasoline and distillate stockpiles.

Early Wednesday, the Commerce Department said U.S. orders for durable goods edged up 0.1% in August, defying forecasts for a seasonally-adjusted drop of 1.5% and providing some support for oil prices. New-home sales also rebounded in August.

Also in August, China’s apparent oil demand climbed by 5.3% to average 9.42 million barrels per day compared with a year earlier, according to a Platts analysis of Chinese government data released Wednesday. Average apparent oil demand last month, however, was the lowest since the same month a year ago, the analysis showed.

Fawad Razaqzada, technical analyst at GFT Markets, said the supply-and-demand picture for oil points to lower prices. Geopolitical risks “are abating and at the same time production of oil is increasing. The demand outlook hasn’t changed much as we haven’t seen anything extraordinary — good or bad — from the world’s major economies in recent times,” he said, in a note, before the EIA’s data release.

In a recent note, TD Securities’s David Bouckhout stood by his call for lower oil prices through the fourth quarter, with diplomacy seemingly gaining traction in Syria, the Iranian president’s willingness to negotiate and Libya restarting production all pointing to lower risk to supplies.

“However,” he said, “it is important to note that despite reduced geopolitical conditions, tensions could easily spark up and put the market back into a geopolitically induced rally higher.”