By Nicole Friedman
U.S. oil futures slid below $95 a barrel for the first time
since January as high global supplies continued to weigh on the
market and traders closed positions ahead of the front-month
contract's expiration.
Light, sweet crude for September delivery tumbled $1.93, or 2%,
to $94.48 a barrel on the New York Mercantile Exchange, the lowest
settlement price since Jan. 17. The more actively traded October
contract fell 89 cents, or 1%, to $92.86 a barrel.
Brent crude, the global benchmark, fell 4 cents to $101.56 on
ICE Futures Europe, a fresh 14-month low.
The price gap between the September and October Nymex contracts,
also called the "spread," narrowed to $1.62 a barrel after settling
Monday at $2.66 a barrel, the largest price difference between the
front-month and second-month contract since 2008. The September
contract expires at settlement Wednesday.
"You have funds exiting today out of speculative positions"
ahead of Wednesday's expiration, which is pressuring prices, said
Carl Larry, analyst at Oil Outlooks & Opinions.
The significantly higher price for September oil reflects
traders' concerns about supplies at Cushing, Okla., the pricing
point for the Nymex contract. Cushing supplies have fallen in
recent months, even as global supplies have been ample.
"Demand for crude in the midcontinent should be fairly robust"
in September, as refiners begin seasonal maintenance, said Andy
Lebow, senior vice president for energy at Jefferies Bache LLC.
"That's being reflected in the spread."
U.S. oil prices have slumped 12% since hitting nine-month highs
in mid-June, as investors perceived lower risk to oil supplies in
Iraq, Russia and elsewhere, and focused instead on high
supplies.
The U.S. Energy Information Administration is set to release its
storage data for the week ended Aug. 15 on Wednesday.
Analysts expect the EIA to report that crude-oil supplies fell
by 900,000 barrels last week, according to a Wall Street Journal
survey.
They also expect gasoline supplies to fall by 1.3 million
barrels and stocks of distillates, including diesel and heating
oil, to decline by 700,000 barrels.
U.S. gasoline and distillate supplies, including diesel fuel and
heating oil, have fallen in recent weeks, even as refineries have
run at unusually high rates to produce more. The busy
summer-driving season lasts through the end of August.
"I think demand is going to be a little bit stronger this week"
with the Labor Day holiday ahead, Mr. Larry said.
Front-month September reformulated gasoline blendstock, or RBOB,
rose 3.94 cents, or 1.5%, to $2.6954 a gallon. September diesel
gained 1.11 cents, or 0.4%, to settle at $2.8171 a gallon.
The American Petroleum Institute, an industry group, said late
Tuesday that its own data for the same week showed a
1.4-million-barrel drop in crude stocks, according to industry
sources. The API also said that gasoline supplies fell by 2.1
million barrels and stocks of distillates fell 568,000 barrels, the
sources said.
Write to Nicole Friedman at nicole.friedman@wsj.com
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