RTRS: Oil falls towards $70 as distillate inventories surge
By Sambit Mohanty
SINGAPORE (Reuters) - Oil fell nearly 1 percent toward $70 on Wednesday, giving up some of the previous day's gains of 3 percent, as a higher-than-expected rise in oil product stocks outweighed news signaling a U.S. economic recovery.
Strong growth in U.S. retail sales, New York State manufacturing activity and U.S. producers' prices failed to offset energy demand concerns in the world's top consumer after data showed a sharp jump in U.S. distillate stocks.
"The market is drawing conclusions from the API report showing a huge jump in product stocks. It is evident from the figures that demand is still lacking," said analyst Michelle Kwek at Informa Global Markets.
NYMEX crude for October delivery was down 69 cents at $70.25 a barrel by 10:45 p.m. EDT, after settling up $2.07 on Tuesday, while ICE Brent was down 70 cents at $69.16.
Though oil has more than doubled from this year's low of $32.70 hit on January 20, it is trading 52 percent below the record high of more than $147 struck in July 2008. The market this year hit a high of $75 on August 25.
"I expect prices to hover between $60 and $70. At this stage, you could day that demand has still not recovered to the extent that would help to sustain prices above $70," Kwek added.
The American Petroleum Institute said in its weekly inventory report after Tuesday's close that crude stocks rose by 631,000 barrels last week, against the forecast in a Reuters poll of analysts for a 2.4-million-barrel drawdown.
The industry group also said distillate stocks, which include heating oil and diesel fuel, jumped by 5.2 million barrels, against a forecast rise of 1.3 million. The U.S. Energy Information Administration (EIA) will release its own data later on Wednesday.
"The oil market currently is focusing more on EIA data than equities or the dollar," Kwek said.
The U.S. currency hit a one-year low against a basket of major currencies as a sell-off gathered steam, with investors moving to riskier assets, pushing up stocks. Japan's Nikkei average rose 0.8 percent on Wednesday. .N
In the United States, retail sales rose at the fastest pace in 3- years in August and New York State manufacturing activity hit a near two-year high, data showed, more signs that economic activity was improving.
A separate report showed prices received by U.S. producers rose faster than expected last month, also giving a lift to U.S. stock markets.
Federal Reserve Chairman Ben Bernanke said the worst U.S. recession since the Great Depression had probably ended, but the recovery would be slow and creating new jobs would take time.
The Organization of the Petroleum Exporting Countries said signs of a rebound in the world economy appeared to be gathering but that the recovery would be gradual.
