Oil falls as inventories at biggest hub rise most since April
MOMING ZHOU
NEW YORK (Bloomberg) -- Oil fell to a three-month low after an Energy Information Administration report showed inventories at the biggest U.S. hub increased the most since April.
Supplies at Cushing, Oklahoma, the delivery point for U.S. benchmark oil futures, rose for a third week, the EIA said. While total U.S. stockpiles declined, inventories were still more than 90 MMbbl above the five-year average level.
Oil’s rebound from a six-year low in March has faltered amid economic uncertainty in China and Greece and speculation that a global glut will persist. Rising Iranian crude exports under the terms of a nuclear deal reached Tuesday won’t occur until next year, according to banks including Goldman Sachs Group Inc. and Citigroup Inc.
“This is the third consecutive week that we saw a build at Cushing, and it’s a bearish number,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We had a crude draw. But overall we still have a lot of supplies here.”
West Texas Intermediate for August delivery dropped $1.63, or 3.1%, to end at $51.41/bbl on the New York Mercantile Exchange, the lowest since April 9. Brent for August settlement, which expires Thursday, fell $1.46, or 2.5%, to $57.05/bbl on the London-based ICE Futures Europe exchange.
Supplies at Cushing rose 438,000 bbl to 57.1 million in the week ended July 10, the EIA said. Total crude stockpiles dropped 4.35 MMbbl to 461.4 million. Analysts surveyed by Bloomberg had expected a decline of 1.9 million.
Iranian Barrels
Refinery crude use increased 229,000 bpd from the previous week to 16.8 million, the highest level since the EIA weekly record started in 1989. Plants operated at 95.3% of their capacity, the strongest since December.
Restrictions on Iran will remain in place at least until the United Nations reports on the country’s compliance with the deal in December, diplomats involved in the talks said Tuesday. The U.S. Congress has 60 days to review the agreement in Washington, where some lawmakers oppose any compromises.
Iran, which had signaled it wanted to boost shipments by as much as 500,000 bopd immediately after a deal with world powers, will probably be limited first to selling crude stockpiled on tankers, Goldman said in a report this week. Iran may boost exports by 200,000 to 400,000 bopd in 2016 and production is likely to expand the following year, according to Goldman.
“The Iran situation has already been priced in,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “There will be no immediate increase in exports.”
