Oil futures headed towards their lowest settlement in more than five weeks after US government data showed an unexpected build in US crude stockpiles after eight straight weeks of declines.
Light sweet crude for August delivery declined by $2.12 or 3.58% to $57.77 a barrel on the New York Mercantile Exchange. Based on the most active contracts, prices for the front month contract haven’t closed below $58 a barrel since May 28.
Brent for August delivery, the global benchmark, most recently fell by $1.25 or 2% to $62.34 a barrel on the London based ICE Futures Exchange.
The government backed Energy Information Administration reported Wednesday that US crude inventories had grown by 2.4 million barrels for the week ending June 27th. Analysts polled by Reuters had projected a 2 million barrel consensus draw for the same period.
According to the data, gasoline inventories fell by 1.8 million barrels for the same period and refinery utilization also grew to 95% of capacity from 94% indicating a growth in demand during the US peak driving season despite the growth in stockpiles.
“Even at these high utilization rates, we are not drawing enough inventory,” Andy Lipow, president of Lipow Oil Associates in New York., told the Wall Street Journal.
“This portends continued crude-oil price weakness through the balance of the year,” especially in the fall when refineries shut units to perform seasonal maintenance, he said.
Also weighing prices down was a rise in the dollar against other currencies on the continuing financial crisis in Greece after Greece defaulted on a 1.6 billion Euro loan owed to the International Monetary Fund on Tuesday night.
According to Reuters, stronger dollar is bearish for the demand of commodities denominated in dollars like oil as it makes them more expensive to holders of foreign currencies.
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