Oil price falls to 7-week low

| Wednesday August 25, 2010 00:00

US crude for October delivery fell as much as 56 cents to $72,54 a barrel, the lowest price since July 7. It was down 33 cents at $72,77 by yesterday. ICE Brent for October fell 35 cents to $73,27.

'The basic issue is just record-high inventory levels at the end of the gasoline season, when demand is going to be dropping,' said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp. 'US gasoline inventories have gone sideways during the peak driving season, when we should get a draw. We are pretty close to $72, which is support, but if we break through that we'll go to the 60s.'

Prices of gasoline component RBOB for September delivery slumped to a fresh trough of 186.65 cents a gallon on Tuesday, the lowest intraday price since early February.

The dollar gained about 0,25 percent against a basket of currencies on Tuesday.

Crude inventories in the US were forecast to have climbed 800 000 barrels last week, a Reuters survey showed, while stockpiles of distillates including heating oil and diesel may have advanced one-million barrels, in what would be their 13th consecutive weekly gain.

US gasoline inventories probably fell 200 000 barrels the week ended August 20, the survey showed ahead of an industry weekly inventory report on Tuesday and government statistics on Wednesday, compared with a 3,3-million-barrel drop in the same week a year ago.

Gasoline stockpiles have increased during the northern hemisphere summer in 2009 and 2010, US government data show, counter to normal seasonal patterns. And this year's gain has left supplies at the highest level for August since at least 2004.

The US driving season, when holidaymakers take to the roads, sending demand for motor fuel to its annual peak, will finish with the Memorial Day long weekend in early September.

In the week to August 13, total commercial crude and product inventories rose to 1,13-billion barrels, from 1,125-billion barrels the week before, eclipsing the previous weekly record high of 1,127-billion barrels set in 1990, when the government began issuing weekly inventory reports.

The American Petroleum Institute will publish industry inventory figures for the week ended August 20 on Tuesday, followed by an Energy Information Administration stockpiles and demand report on Wednesday.

Oil markets will also focus on US housing indicators later on Tuesday. Home sales in July, usually one of the most active months for housing activity, should paint a poor picture as the sector continues to struggle in the aftermath of the expiration of popular home buyer tax credits.

Japan's Nikkei average dropped below the closely watched 9,000 point mark for this first time in 15 months on Tuesday, tracking US stocks lower.

Wall street gave back early gains and fell on Monday as a slew of corporate takeover activity, usually a sign of investor optimism, was outweighed by concerns about the global economy. 'A recovery in the stock market and in oil prices would require an improvement in some kind of leading indicator, like employment,' Nunan said.

Tropical Storm Danielle in the central Atlantic Ocean strengthened into the season's second hurricane Monday afternoon as it continued to move west-northwest toward Bermuda and not toward key oil and gas producing areas in the Gulf of Mexico. (Reuters)