Oil fell from six-week highs to trade around $80 today as forecasts for higher US crude and gasoline stockpiles offset concerns that a strike at Total's French refineries would trigger fuel shortages.
US crude for April declined 25 cents to $80.06 a barrel by 0555 GMT. NYMEX March futures expired on Monday having touched $80.51, the highest intra-day price for a front-month contract since January 13th after six days of walkouts at the French refineries.
"The impact of the strikes will probably not be too big because refinery utilization is still low, so I assume that others will step in and increase their production if this is an issue that lasts longer," said Stefan Graber, a commodities analyst with Credit Suisse in Singapore. "We don't see a lot of signs of an immediate pick-up in US oil consumption, so we could see more rounds of increasing inventories."
Crude stockpiles in the United States posted a fourth consecutive week of gains last week as imports grew, according to a Reuters poll, while gasoline supplies probably rose for a third week in a row.
London ICE Brent for April slid 33 cents to $78.28.
US crude inventories rose 1.9 million barrels and gasoline stockpiles added 500,000 barrels in the week ended February 19th, the survey showed.
"On the fundamental side, we really didn't see a significant improvement that would warrant a move above $80," Graber said. The recent price increase "has been more related to the fact that sentiment and risk appetite have improved a bit."
Asian shares turned lower today and the dollar was trapped in a tight range as investors waited for Federal Reserve Chairman Ben Bernanke to shed light on how soon key US interest rates may start to rise.
Recent unusually cold weather probably drained US distillate stockpiles for a fourth consecutive week. Inventories in this category, which includes heating oil and diesel, fell by 1.9 million barrels, the poll showed.
But warmer weather may lead to higher gasoline use in coming weeks, JP Morgan analysts said in a weekly note. Road travel is bound to increase in coming months in the run-up to the northern hemisphere summer driving season from late May through early September. Snowstorms in January and February had snarled traffic along highways in the US east coast.
US gasoline was still trading close to six-week highs today. The Nymex contract for March RBOB, the main component in US gasoline, rose marginally to 211.68 cents a gallon, after hitting an intra-day high of almost 213 cents yesterday.
The industry group American Petroleum Institute will release its weekly inventory report today at 9.30pm, while the federal Energy Information Administration will follow with weekly statistics tomorrow 3.30pm.
Motorists rushed to the pumps in France yesterday after a union said the refinery workers' strike would close more than half of France's oil refining capacity. Total said it would meet unions this morning after talks collapsed late on Sunday.
Petroleum industry body UFIP said yesterday France had around seven days of fuel supply left before it faced a shortage. The CGT union said output would grind to a halt at Total's six refineries by Tuesday.
This will cut more than 1 million barrels-per-day (bpd) in French refinery capacity, of a total capacity of 2 million bpd, according to Reuters calculation.
Workers at Exxon's two French refineries voted to join the action from today.
Reuters