WTI oil futures dip
Brent crude is now below the 100-day moving average for first time since January, falling below $117.30 a barrel.
The intraday low for June Brent crude futures was $115.92 per barrel in mid-afternoon trade.
Also weighing on commodities was a CME announced Wednesday that it will raise margins for non-hedged accounts, effective May 7. Previously, members had enjoyed special terms that allowed them to meet the lower "hedger" margin requirement but will now be treated as speculators for outright positions, therefore, would pay a higher margin.
"We're basically talking about a margin increase of more than 30 percent, depending on what commodity you're talking about," says NYMEX floor trader Alan Harry of Spartan Commodity Partners LLC. "So traders are starting to bring down positions."
Oil is lower for a second day. On Wednesday, the Energy Information Administration reported that U.S. oil inventories rose last week to the highest level since September, 1990. Stockpiles rose by a greater-than-expected 2.8 million barrels during the week, and are now at their nineteenth highest level.
Also bearish for oil prices was word that the United Arab Emirates new pipeline bypassing the Strait of Hormuz is complete and expected to start operating within three months.
UAE Oil minister Mohammed al-Hamli was quoted by Reuters as saying the pipeline is now filled with crude and expects to start exporting within three months.
The pipeline is expected to initially operate at a rate of 1.4 million barrels per day, and could rise to 1.8 million barrels. The pipeline would give the the UAE an alternate to the Strait of Hormuz, a key shipping channel which Iran has threatened to block. The pipeline will link the Habshan oilfields with the port of Fujairah, an oil storage terminal on the Gulf of Oman.
Meanwhile, OPEC Secretary General Abdullah al Badri stressed in a conference in France that the organization is actively pumping above its official target to try to bring prices down.
Badri noted “we are not happy with prices at this level because there will be destruction as far as demand is concerned.” Badri again reiterated that $100 a barrel was a comfortable price, echoing similar comments by Saudi Arabia earlier this year.
The CME margin change is due to new federal Dodd-Frank rules for exchanges. The CME says there will be no change for members who qualify as hedgers. The CME says hedgers would include, for example, those who "make a market in one commodity or product and lay off their risk in another commodity or product at the CME group or other markets." These members will be able to continue paying the lower hedge margin.
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