Oil fell today after euro zone ministers failed to reach agreement on a second bailout for Greece, while rising gasoline stockpiles in top consumer the United States signalled fuel demand was stalling.
Brent crude for August, which will become the front-month contract after July expires at the end of today's trade, shed 20 cents to $119.15 a barrel by 0610 GMT, while July US crude slipped 45 cents to $98.92.
US gasoline inventories rose by 1.1 million barrels last week, industry group American Petroleum Institute said, their sixth consecutive gain and in line with forecasts. That moderated the bullish effect of a drop in crude stockpiles, which fell 3 million barrels, twice as much as expected.
"We know that gasoline demand is still slow despite falling prices, so we don't see a very positive side for growth," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. "There's a bit of profit-taking after the price increase over the past few days. People are also focused on and worrying about how Europe's sovereign credit issues will be solved."
The dollar gained 0.25 per cent against a basket of currencies after euro zone ministers failed to agree on how private holders of Greek debt should share the costs of a new bailout, putting the onus on the leaders of Germany and France to forge a deal later this week.
Nervous markets pushed the bond yields of Greece, Ireland and Portugal to their highest levels since the introduction of the euro in 1999.
The premium of front-month Brent to US benchmark West Texas Intermediate (WTI) hovered more than $1 below today's record $22.79 a barrel, at around $21.10.
Brent yesterday reached a five-week high and US crude rose more than 2 per cent as data from top oil consumers the United States and China eased concerns about the global economy and the threat to oil demand.
While US retail sales fell in May for the first time in 11 months, the slip was less than expected. Producer prices rose less than expected, braking sharply from April.
US retail gasoline demand climbed slightly last week from a year earlier, by 0.2 per cent, a second consecutive rise as pump prices continue to ease, a report by MasterCard Advisors' SpendingPulse showed yesterday.
Gasoline demand broke a near two-month long slump in the first week of June with data that included the Memorial Day weekend, marking the start of the summer driving season, showing demand rising 0.5 per cent from a year ago.
But over the latest four weeks, average US gasoline consumption was down 1 per cent from year-earlier levels.
Government data on US oil inventories and demand follows from the Energy Information Administration today.
China's implied oil demand in May topped the 9 million barrel-per-day mark for the seventh consecutive month, taken as another signal that a tap on the economic brake by authorities had not hurt demand for petroleum.
But Reuters calculations based on preliminary government data did show that while May oil demand was up versus the year-ago period, the growth rate slowed to its lowest since October and demand slipped sightly from April.
European crude benchmark Brent's premium to Middle East marker Dubai rose to its highest level since 2004 for a second straight day, as the imbalance between undersupplied light sweet grades and abundant heavy sour supplies grows with increasing output from Saudi Arabia.
The Brent/Dubai Exchange of Futures for Swaps (EFS) for July jumped 85 cents to $8.85 a barrel at 0400 GMT, Reuters data showed.
Saudi Arabia's crude output is expected to jump to nearly 10 million barrels per day (bpd) in June, industry sources said yesterday.
In the weeks leading up to last week's failed OPEC meeting, US and Saudi Arabian officials met to discuss surprising the market with an unprecedented arrangement: exchanging urgently-needed high-quality crude oil stored in the US emergency reserve for heavier, low-quality oil from Saudi Arabia, according to people familiar with the plan.
Reuters
