US crude futures fell for a second straight day on Wednesday on bloated inventories in the world's top consumer, while Brent crude rose on supply concerns. Government data showing another build in US inventories weighed on the front end of the New York Mercantile Exchange futures curve, with the value of the June contract which expires on May 20, discounted by as much as $4.68 against the July contract.
-- Crude stocks at Cushing extend record levels: EIA The contango - when prices of future delivery months are higher than the nearest month - was at the widest since February 2009. US crude for delivery in June settled down 72 cents at $75.65 a barrel, after trading as low as $74.75 in the session.
Brent crude rose 71 cents to settle at $81.20 a barrel, expanding its premium to US crude to $5.89 CL-LCO1=R, the widest since February 2009, according to Reuters data. Brent strengthened after ExxonMobil confirmed it has declared force majeure on shipments of Qua Iboe crude from Nigeria, which could tighten the Atlantic basin market. Data from the US Energy Information Administration showed inventories at the Cushing, Oklahoma, delivery hub for the NYMEX futures contracts hit another record at 37 million barrels in the week to May 7.
That total has brought Cushing's storage near the total capacity of around 53 million barrels, according to Reuters estimates. Typically, operating capacity is only 80-90 percent of total capacity. Total US crude stockpiles, which have risen in 14 of the last 15 weeks, gained 1.9 million barrels to total 362.5 million last week, exceeding the forecast in a Reuters poll for a 1.3 million barrel build.
US RBOB gasoline traded almost 1 percent higher, after EIA data showed an unexpected 2.8 million-barrel drop in gasoline inventories as the United States gears up for the summer driving season, when gasoline demand peaks. The price drop in crude and rise in gasoline sent the gasoline crack spread, which measures the profits refiners receive from gasoline, to $17.83 a barrel, the highest level since February 2009.
"(The EIA report) was a little bit of a mixed message, with higher-than-expected crude inventories, but that has been the status quo lately as we see the spreads continue to widen with the big glut at Cushing," said Mike Zarembski, senior commodities analyst for optionsXpress in Chicago. Oil prices earlier found support after Spain unveiled an austerity plan that further eased jitters over eurozone debt worries, improving investor risk appetite.
US crude touched $87.15 on May 3, its highest level in almost 19 months, amid hopes that global economic recovery would boost demand after two straight years of declines. The EIA data showed US gasoline demand over the past four weeks up 2.7 percent compared with year-ago levels, while distillate demand rose by 7.5 percent for the same period.
The International Energy Agency on Wednesday trimmed its oil demand growth forecast for 2010 by 50,000 barrels per day, to 86.4 million bpd. The revision brings the EIA and the IEA forecast in line, with both agencies now forecasting a 1.6 percent demand increase for 2010. Oil prices have been volatile since the European Union announced a rescue package for the bloc's debt-stricken nations totalling almost $1 trillion two days ago.