Oil prices extend losses with fresh 3% decline

Oil prices extended their losses yesterday, falling nearly 3%, after a smaller-than-expected US inventory drawdown and jitters ahead of the vote on whether Britain should stay in the EU.

Crude futures rose early in the day, before the US Energy Information Administration (EIA) reported a stockpile decline of 917,000 barrels for last week.

While it was the fifth consecutive weekly draw for crude, the number posted by the EIA was smaller than a 1.7m-barrel drawdown forecast by analysts in a Reuters poll.

It was also about a third of the 5.2m-barrel drop reported on Tuesday by trade group the American Petroleum Institute (API).

Oil futures had settled lower on Tuesday but rose in post-settlement trade after the API data showed the huge crude draw.

Yesterday, Brent crude futures were down $1.40, or 2.8%, at $49.22 a barrel. US crude’s West Texas Intermediate (WTI) futures fell $1.37, or 1.7%, to $49.08.

“Today’s report is decidedly bearish, which has caught markets off guard after yesterday’s API expectation of a five million-barrel crude draw,” Troy Vincent, analyst at New York-based crude cargo tracker ClipperData, said, referring to the EIA data.

“Although gasoline demand is still strong relative to year-ago levels, a build to both gasoline and distillate inventories does not bode well for product prices either. With this report, we should expect WTI to move back below $49 this week.”

Investors also braced for more market swings as the dollar gyrates on speculation over Britain’s referendum on the EU today. The greenback determines demand for dollar-denominated oil among holders of other currencies when other fundamental factors are less compelling.

Reuters