Oil drops again as supplies top more than forecast

OIL dropped for a second day in New York as US equities declined on a decrease in JPMorgan Chase & Co’s earnings and crude supplies increased more than forecast.

Oil drops again as supplies top more than forecast

Brent oil’s premium to New York futures reached a record.

Futures retreated 1.6% as the Standard & Poor’s 500 index halted its biggest gain over seven days since 2009. Oil stockpiles rose 0.4% and gasoline inventories unexpectedly tumbled as the refinery utilisation rate fell the most in a single week since February.

“The crude market is really tracking the S&P 500 and the dollar right now, and I don’t think it’s trading independently of anything,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “The crude number was a bearish one today.”

Crude for November delivery declined $1.34 to settle at $84.23 (€61.11) a barrel on the New York Mercantile Exchange. Prices are down 7.8% this year.

Brent for November settlement on the London-based ICE Futures Europe exchange dropped 0.2% to $111.11 a barrel. The European benchmark crude was at a premium of $26.88 to the US contract, breaking the record of $26.87 set on September 6.

“It’s all about the economy,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc in New York. “If the economy looks good we go up, if the economy starts to sputter we go down.”

Oil pared its intraday loss after US president Barack Obama linked Iran to a foiled plan to assassinate the Saudi Arabian ambassador to the US.

Obama said a person charged with plotting to kill Saudi Ambassador Adel Al-Jubeir “had direct links, was paid by” and “directed by individuals in the Iranian government”. He said the US would “continue to mobilise the international community” to “make sure that Iran is further isolated.”

Oil futures settled at a two-week high of $85.81 a barrel on October 11, capping the longest rally this year, as equities and the euro rose as European officials worked to stem the sovereign-debt crisis.

Prices pared early losses after Slovakia became the last EU country to approve Europe’s enhanced bailout fund. Euro-area countries will probably decide within 10 days on the next aid payment for Greece and plan to avoid a “credit event”, an EU official who spoke on condition of anonymity told reporters yesterday.

“Pullback in the euro and the equities are pressuring prices,” said Michael Lynch, president of strategic energy and economic research in Winchester, Massachusetts. “We’re not out of the woods yet on Europe and Greece, and given that, the move up to $85 seems overdone.”

The euro was little changed at $1.3796 in New York from $1.3791 yesterday. Oil supplies rose 1.34m barrels to 337.6m last week, more than the 800,000-barrel median estimate of 15 analysts surveyed by Bloomberg News before the energy department report.

Refineries ran at 84.2% of capacity last week, down from 87.7% the previous week.

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