Oil Falls to $65 as Gasoline Supply Concerns Ease
U.S. oil fell below $65 as easing concerns that of a potential U.S. gasoline shortfall ahead of peak driving season in the world's top consumer.
U.S. crude settled down $1.30 cents or 2% at $64.97 , trading as low as $64.80. London Brent oil lost 97 cents or 1.4% to settle at $69.52 after surging $1.07 on Monday.
Refinery problems in the United States have drawn down gasoline stocks ahead of summer holiday season, pushing pump prices to an inflation-adjusted high reached in the early 1980s during the Iran-Iraq war.
U.S. gasoline futures fell 9.5 cents or 4% to settle at $2.3063 . Heating oil for June delivery dropped 4.37 cents or 2.2% at $1.9072 .
A Reuters poll of analysts forecast U.S. government stock data to be released Wednesday would show gasoline inventories rose by 1.4 million barrels last week.
In addition, news that one of Colonial Pipeline's key gasoline lines shipping fuel from Mississippi north was fully nominated helped push down U.S. gasoline futures more than 3% on Tuesday.
"I think the market is being lead by the gasoline complex, the expectations are for a build in inventories," said Eric Wittenauer, analyst for A.G. Edwards.
"Traders are on edge that the build may exceed expectations and that one week those refiners are going to come back and show a big build in inventories."
Brent rose to a nine-month high on Monday, stoked by further violence in OPEC member Nigeria.
Kidnappings and militant attacks have surged in the world's eighth-largest oil exporter since February 2006, cutting a third of the country's crude output, which is valued for its high yield of gasoline.
"We expect the situation in Nigeria to continue to support crude prices. The turmoil and uncertainty are expected to continue at least until the new president of Nigeria takes office on 29 May," said Mike Wittner of Calyon investment bank.
"Brent at $70 a barrel is justified in the near-term."
Gunmen seized a Lebanese worker in Nigeria's western delta oil city of Warri on Tuesday, taking the number of foreign workers being held in the region by militant groups to 15.
Further notice of supply vulnerability came when BP shut down 100,000 barrels per day (bpd), a quarter of production, from its Prudhoe Bay oilfield in Alaska due to a leaking water line.
Consumer nations have called on the Organization of the Petroleum Exporting Countries to pump more crude to help ease prices and replenish fuel stocks. But oil ministers insist crude supplies are adequate.
Oil tanker tracker Petrologistics reckons OPEC has opened the taps this month to counter a drop in Nigerian supply.
OPEC's 10 members subject to output limits are expected to pump 26.9 million bpd, up from 26.8 million bpd in April, said Conrad Gerber of Petrologistics.