Oil price steady around $77
U.S. crude stocks surged 7.31 million barrels last week as imports jumped, government statistics showed on Wednesday, while the nation’s gasoline and distillate stocks including diesel gained for the fifth and ninth consecutive weeks respectively.
Wall Street slipped on Wednesday and Asian shares slid early on Thursday after new orders for long-lasting manufactured goods posted their largest decline since August, a fresh sign the U.S. economy slowed in the second quarter.
“The crude market has shown the economy is not absorbing the supply, nor is the motivation there for refiners to process those supplies,” said Jonathan Barratt, managing director at Commodity Broking Services in Sydney. “The numbers in America are not that good.”
U.S. crude for September advanced 13 cents to $77.12 a barrel at 3:27 a.m. ET, after dropping close to 0.7 percent on Wednesday, having touched $79.69 a day earlier, the highest price in almost 12 weeks. ICE Brent gained 24 cents to $76.30.
“We have tested $80 twice and failed. Now we are going to test lower into the range again,” Barratt said, referring to the $70-$80 range within which oil has traded for nearly two months.
The Organization of the Petroleum Exporting Countries (OPEC) has for the past year and a half expressed a preference for oil to remain stable around $75 a barrel, saying that price encourages investment to sustain and increase production capacity and does not threaten the economic recovery.
“In a crisis situation you need stability,” Barratt said. “Crude is very stable. This suggests to me that the forces of supply and demand are at ease with each other.”
Oil analysts including Michael Wittner from Societe Generale pointed out that total U.S. product demand growth was robust at 3.4 percent over the past four weeks from a year earlier, according to EIA figures.
But supply accumulation is outpacing consumption at a time when the U.S. economy is recovering from the most severe recession of the post-war era.
The U.S. economy kept growing overall in recent weeks, but unevenly and it actually slowed in a few regions as housing markets softened after the end of a popular tax break, the Federal Reserve said on Wednesday.
Last week’s gain in U.S. crude stockpiles was the biggest since October 2008, according to statistics from the U.S. Energy Information Administration, which published Wednesday’s inventory report. U.S. weekly crude imports reached 11.12 million barrels last week, the highest level since August 2006.
Many analysts had expected total crude stocks to be lower on disruptions from Tropical Storm Bonnie as it approached the Gulf of Mexico last week. But Bonnie dissipated at the weekend, without damaging regional energy infrastructure, although some oil production was interrupted late in the week.