Brent futures dropped further below $104 per barrel this morning, as data showing a surprise jump in US gasoline stockpiles and worries that peak summer demand in the world’s top oil consumer may falter dragged down prices.
But losses were capped ahead of minutes from a Federal Reserve meeting, scheduled for release later in the day, that will be scoured for details on the central bank's ultra-easy monetary policy, after latest indications that its bond buying has further to run.
“Everyone is marking US demand as we’re approaching that time of the year when oil markets are supported by U.S. drive timings,” said Jonathan Barratt, chief executive of BarrattBulletin, a Sydney-based commodity research firm.
“We’ve seen a couple of upticks ... people are thinking Brent has gone too far and we are at significant levels of (technical resistance).”
Brent crude fell 31 cents to $103.60 per barrel at 06.01 GMT, after shedding nearly a dollar in the previous session. US crude fell 42 cents to $95.76.
Data released by the American Petroleum Institute late Tuesday showed a build of 532,000 barrels in U.S. crude stockpiles and a 3-million-barrel rise in gasoline inventories during the week ended May. 17, increasing expectations that markets will be well supplied during the summer driving season.
Analysts had expected crude stocks to drop 800,000 barrels and gasoline stocks to remain unchanged from a week ago.
The U.S. Energy Information Agency (EIA) will release its data on inventories later on Wednesday.
Brent may drop to $102.38 per barrel, while the signals are conflicting for US oil as its failure to break resistance at $97.17 per barrel has cast some doubt on the extension of the uptrend from the May 15 low of $92.13, Reuters technical analyst Wang Tao said.
But a softer dollar, after two senior Fed officials dampened speculation that the central bank’s quantitative easing programme might end soon, supported oil prices.
A weaker US currency makes dollar-priced commodities cheaper for holders of other currencies.
“We expect Bernanke and the Fed will remain cautious in any tapering of the current $85 billion per month asset purchase program,” ANZ analysts said in a note. “The minutes from the FOMC’s May meeting will also likely reflect this.”
Investors will also watch initial purchasing manager’s indexes for May due on Thursday, for signs of economic revival in the three key consumer regions - China, the United States and the euro zone.
Reuters
