MW: Oil futures fall on expected rise in supplies, China worries
American Petroleum Institute due to report data on U.S. petroleum inventories
By Polya Lesova, MarketWatch
FRANKFURT (MarketWatch) -- Oil futures dropped 1% on Tuesday, as expectations of a rise in U.S. crude inventories and concerns over China's attempt to slow down its growth prompted traders to sell crude.
Crude oil for March delivery fell 80 cents, or 1%, to $74.46 a barrel in electronic trading on Globex. Earlier, the contract hit an intraday low of $74.14 a barrel.
Oil prices finished higher on Monday.
"Early Tuesday trading sentiment was dampened by China's move to impose higher reserve ratios for selected banks," said analysts at Vienna-based JBC Energy in a note to clients. "It is feared that tighter monetary policy in the world's second largest oil consumer could hamper the global economic recovery."
China's central bank has singled out several large Chinese banks and required them to raise their reserve ratios for excessive lending, while also asking some not to issue new loans, according to reports Tuesday. The news suggests that the government is taking steps to cool down the red-hot pace of the nation's loan growth.
Supply data ahead
Energy traders are awaiting data on U.S. petroleum inventories. The American Petroleum Institute will release its report at 4:30 p.m. Eastern on Tuesday. The Energy Information Administration will release its more closely watched data at 10:30 a.m. on Wednesday.
Analysts polled by Platts expect a 2-million-barrel build in commercial crude stocks for the week ended Jan. 22. They also project an increase of 1.7 million barrels in gasoline inventories and a decrease of 1.8 million barrels in distillate supplies.
"If current trends in refinery runs and imports continue as expected, a build in crude stocks will result and reverse the prior week's decline," said Linda Rafield, senior oil analyst at Platts, in a statement.
Analysts surveyed by Platts expect refinery utilization to drop 0.6 percentage points to 77.8%, a result of seasonal maintenance.
Investors will also receive on Tuesday data on U.S. house prices in November and consumer confidence in January.
In Washington, officials from the Federal Reserve will gather behind closed doors on Tuesday and Wednesday to examine monetary policy. An official statement will be released around 2:15 p.m. Eastern on Wednesday.
Analysts expect the Fed will leave the federal funds rate between 0 and 25 basis points and reiterate that the rate will stay "extraordinarily low" for an "extended period."
U.S. stock futures pointed to a lower opening on Wall Street on worries over Japan's fiscal health and moves to limit China's growth, as a slate of earnings are due. Standard & Poor's Ratings Services, meanwhile, warned Tuesday that it may downgrade Japan's sovereign credit ratings.
