Forexpros – Crude oil futures extended heavy losses during early U.S. trade on Wednesday, after a U.S. government report showed a significant increase in U.S. oil supplies last week, while mounting speculation Western nations were considering the release of strategic oil reserves also weighed.
On the New York Mercantile Exchange, light sweet crude futures for delivery in May traded at USD105.23 a barrel during U.S. morning trade, plunging 1.95%.
It earlier fell by as much as 2.3% to trade at USD104.91 a barrel, the lowest since March 22.
Crude prices traded at USD105.29 prior to the release of the Energy Information Administration data.
The U.S. EIA said in its weekly report that U.S. crude oil inventories surged by 7.1 million barrels in the week ended March 23, significantly higher than expectations for a 2.5 million barrel increase. U.S. crude supplies fell by 1.2 million barrels in the preceding week.
Total U.S. crude oil inventories stood at a six-month high of 353.4 million barrels as of last week.
Total motor gasoline inventories decreased by 3.5 million barrels, above expectations for a 1.7 million barrel decline, after falling by 1.2 million barrels in the preceding week.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Crude prices were lower before the U.S. supply data after France’s Le Monde newspaper said that French President Nicolas Sarkozy favored for the release of emergency oil stocks.
The report added that France was in contact with the U.S. and the U.K. over possibly releasing oil reserves to control rising prices.
Oil prices came under pressure Tuesday by market talk that a U.S. Energy Department aide said the U.S. was considering the release of strategic oil reserves.
Last week, reports surfaced that France and other industrialized nations were considering a release from strategic stockpiles.
U.S. President Barack Obama discussed releasing emergency oil supplies with U.K. Prime Minister David Cameron on March 14 but the leaders reached no agreement.
Though the report was denied by U.S. officials, it has still added a new dimension to the recent price increases, putting investors on watch for any government intervention.
Meanwhile, Iran’s Foreign Minister Ali Akbar Salehi said earlier Wednesday that renewed nuclear talks between Iran and six world powers, dubbed the P5+1 group of nuclear negotiators, are expected to take place on April 13.
The six world powers include, the U.S., the U.K., France, Germany, Russia and China. A venue for the talks will be finalized in the coming days.
U.S. President Barack Obama said Sunday that there is still time to resolve the dispute over Iran diplomatically, but that the window is closing.
Also weighing on oil prices, the U.S. Commerce Department said earlier that durable goods orders rose 2.2% in February, partially reversing January’s revised 3.6% decline, but fell short of expectations for a 3.0% increase.
Core durable goods orders, which exclude transportation, rose by a seasonally adjusted 1.6% in February, compared to expectations for a 1.5% gain.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for May delivery dropped 1.4% to trade at 123.75 a barrel, with the spread between the Brent and crude contracts standing at USD18.52.
Wall Street investment bank Goldman Sachs said in a report Tuesday that the Brent-WTI spread is set to narrow with the reversal of the Seaway pipeline in June, which will alleviate a glut of oil in the U.S. Midwest by pumping it to refineries on the Gulf Coast.
The price for the U.S. benchmark crude will rise and the discount to the London-traded grade will narrow, the bank said, reiterating its recommendation to buy September WTI futures.
Forexpros
