Oil prices fell more than 1 percent on Wednesday, slumping after two straight higher closes on Federal Reserve Chairman Ben Bernanke's expressions of concerns about the economy and on data showing US crude oil inventories unexpectedly rose last week.
Bernanke said the US economy faces "unusually uncertain" prospects and that the central bank was ready to take further steps to bolster growth if needed, in testimony before the Senate Banking Committee. "Bernanke's testimony is very depressing to all asset classes, including crude oil," said Joseph Arsenio, managing director at Arsenio Capital Management in Larkspur, California.
Oil prices had already retreated from a 3-1/2 week high reached in early trading on data showing commercial US crude inventories rose on rising imports and despite higher refinery utilisation. US crude oil for September delivery fell $1.02, or 1.31 percent, to settle at $76.56 a barrel, trading from $76.20 to $78.57. London ICE Brent crude futures fell 85 cents to settle at $75.37 a barrel.
Heating oil futures fell 3.55 cents, or 1.75 percent, to settle at $1.9892 a gallon, after the EIA data showed both heating oil and total distillate stockpiles surged. RBOB gasoline futures fell 1.08 cents, or 0.5 percent, to settle at $2.0678 a gallon, also amid rising inventories. US crude stocks rose 360,000 barrels in the week to July 16 to 353.46 million barrels, against a forecast stocks would be down 1.4 million barrels, the US Energy Information Administration's weekly inventory report showed.
Rising crude imports, up 696,000 barrels per day to 9.94 million bpd, helped offset a 1 percentage point rise in refinery capacity utilisation. The increased refinery use pushed gasoline inventories up 1.12 million barrels, more than the forecast build of 900,000 barrels. Distillate stocks jumped up 3.94 million barrels, much more than the forecast rise of 1.7 million barrels. "This report was negative across the board, with the unexpected build in crude stocks and the build in products too as refineries ramped up production," said Mike Zarembski, senior commodities analyst at Optionsxpress in Chicago.
Before the EIA data, optimism about the economy reflected in rising equities markets had lifted oil prices to $78.57, highest since June 28 when prices reached $79.38 a gallon. Oil's reversal after the inventory data pulled prices back below two key technical resistance points: the 200-day moving average at $77.58, and a trend line connecting several intraday peaks going back to April 6.
After the inventory report crude prices bounced more than 30 cents on news Shell Oil Co had begun pulling nonessential staff from Gulf of Mexico operations because of the threat of a possible tropical storm. Later on Wednesday the US National Hurricane Center lowered to 50 from 60 percent the chance a tropical wave moving across Hispaniola would form a tropical depression.
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