Crude futures dropped 1.4 percent in New York and 1.3 percent in London. The dollar reached a six-year high against the yen after the Federal Reserve increased its outlook for interest rates. U.S. stockpiles of distillate fuel, a category that includes diesel and heating oil, rose last week, government data showed yesterday.
Supplies of gasoil, distillate’s European equivalent, gained in Europe’s Amsterdam-Rotterdam-Antwerp oil-trading hub, PJK International BV said today.
“Yesterday’s Fed statement and news conference have been examined closely and are having an impact on the dollar,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “This is propping up the dollar and putting downward pressure on commodities.”
WTI for October delivery slid $1.35 to settle at $93.07 a barrel on the New York Mercantile Exchange. It was the biggest decrease since Sept. 2. The volume of all futures traded was 3.3 percent above the 100-day average at 2:47 p.m. Prices have decreased 5.4 percent this year.
Brent for November settlement fell $1.27 to end the session at $97.70 a barrel on the London-based ICE Futures Europe exchange. Volumes were 11 percent lower than the 100-day average. The European benchmark crude grade closed at a $5.72 premium to WTI for the same month, down from $5.77 yesterday.
“We’re getting a divided reaction to the Fed,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.6 billion, said by phone. “The stock market is reacting positively to the remarks made at the Fed news conference while the currency and commodity markets are focused on the text. It’s impossible to know at this point what market has it right.”
Commodity markets dropped while U.S. equities climbed. Fed officials signaled they won’t be raising interest rates anytime soon, while suggesting they would tighten credit at a faster pace once the liftoff has begun.
The Bloomberg Commodity Index of 22 futures dropped as much as 1.3 percent.
“Commodities are in headwinds over the dollar’s climb,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $120 billion of assets, said by phone. “The dollar has been on a tear. The Fed seems to be hinting that they will tighten.”
Diesel futures fell as supplies climbed on both sides of the Atlantic. Gasoil stockpiles in independent storage in the European ports increased 7.2 percent to 2.79 million metric tons in the week to today, according to PJK. U.S. inventories of distillate fuel rose 279,000 barrels to 127.8 million in the week ended Sept. 12, the highest level since Sept. 27, 2013, an Energy Information Administration report showed yesterday.
Ultra low sulfur diesel for October delivery dropped 3.28 cents, or 1.2 percent, to close at $2.7123 a gallon in New York. It was the lowest settlement since July 6, 2012. Volumes were 61 percent above the 100-day average.
“Distillate production has been solid,” Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston, said by phone. “It’s getting pummeled and it’s yet to find support.”
U.S. crude supplies rose 3.67 million barrels to 362.3 million last week, the biggest gain in five months, according to the EIA, the Energy Department’s statistical arm. Gasoline inventories declined 1.64 million barrels to 210.7 million.
October gasoline futures slipped 0.82 cent, or 0.3 percent, to settle at $2.561 a gallon on the Nymex. Volumes were 24 percent above the 100-day average. Pump prices fell 0.9 cent to $3.364 a gallon nationwide yesterday, the least since Feb. 16, according to AAA, the largest U.S. motoring group.
A strike among oil workers in Nigeria entered its third day as a resolution hasn’t been reached, Sanusi Abdulakim, deputy president of Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said by phone. Nigeria is Africa’s biggest crude producer.
Libya’s Sharara field, the country’s biggest-producing asset, and the connected Zawiya refinery are still shut, Oil Movement Director Mansur Abdallah said by phone from Zawiya. Sharara was shut after a rocket attack on Sept. 15 on the nearby refinery. The field pumped about 250,000 barrels a day before the disruption, Abdallah said.
“The focus has been on interest rates and that’s pushed the dollar higher, which is hurting demand for commodities,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone. “Oil would be much lower if not for the trouble in both Libya and Nigeria.”
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