MW: Oil futures drop ahead of petroleum supplies report
By Polya Lesova & Nick Godt, MarketWatch
NEW YORK (MarketWatch) -- Oil futures fell nearly 2% to trade slightly above $76 a barrel on Tuesday, as traders reacted to concerns about the health of the economy in China, the second largest consumer of crude oil in the world, and as caution dominated ahead of reports expected to show rising U.S. inventories of crude oil.
Overnight, the Shanghai Composite slumped 3.5% as China's banking regulator warned the nation's lenders to strictly comply with capital requirements or face sanctions. Concerns have mounted that government stimulus and loose lending have fueled a real-estate bubble in China.
Crude oil for January delivery recently lost 1.7%, or $1.38, to $76.18 a barrel in electronic trading on Globex.
"Should the current bullish sentiment on financial markets turn, [oil] may be particularly susceptible to rapid price erosion," said analysts at Commerzbank AG.
"Even [American Petroleum Institute] inventory data, to be released today, could potentially trigger such a price correction," they wrote in a note to clients.
Concerns about Chinese banks put U.S. stocks under early pressure. The Dow industrials (INDU 10,429, -22.07, -0.21%) and the S&P 500 index (SPX 1,105, -1.01, -0.09%) both fell about 0.3%.
News that the U.S. government revised its estimate of growth in the third quarter down to 2.8% from the 3.5% originally reported also contributed to the pressure. Although the revision matched economists expectations, it also showed consumers spent less than initially estimated. Read more on third-quarter growth.
Better-than-expected home price data and consumer confidence data did little to offset the selling trend, especially as another report showed a rising number of U.S. distressed banks in the third quarter.
Also, at 2 p.m., minutes from the most recent Federal Reserve interest-rate-setting meeting will be unveiled.
The API will report inventory data at 4:30 p.m. Eastern. The U.S. Energy Information Administration will release its more closely watched data at 10:30 a.m. on Wednesday.
Analysts polled by Platts expect an increase of 1.4 million barrels in crude-oil supplies for the week ended Nov. 20. They also project a rise of 500,000 barrels in gasoline inventories, with distillate stocks expected to be unchanged from the prior week.
