Oil down towards $74 on US glut
Singapore, September 6, 2010
Oil fell for a second straight session on Monday as the end of the driving season in the United States and record petroleum stockpiles there fuelled doubt that supplies would drain in the face of tepid economic growth.
US crude for delivery in October fell as much as 0.7 percent to $74.09 and was down 40 cents at $74.20 a barrel by 0319 GMT, while ICE Brent crude shed 27 cents to $76.40.
Oil's correlation with stock markets has diminished in the past two sessions as the fundamentals of an oversupplied market and hurricanes deviating from the oil-rich Gulf of Mexico weigh on sentiment.
Asian equities touched one-month highs on Monday, while a stock rally on Friday sent copper to a four-month high.
"We are awash with oil, thoughts about anything happening with the hurricanes have been put to the side and there is nothing on the geopolitical front to worry us," said Peter McGuire, managing director at CWA Global Markets in Sydney.
"There isn't much to drive the market higher.
Traditionally, this time of year we are going into a quiet period when demand comes down."
The US driving season runs from the Memorial Day holiday in late May to the present Labor Day holiday.
While US gasoline demand accounts for more than 10 percent of the world's oil use, refiners are set to decrease the amount of crude they process in coming weeks as they enter autumn maintenance, in preparation to crank up output of winter fuels.
The New York Mercantile Exchange, the home for US crude benchmark West Texas Intermediate, will, because of Monday's US Labor Day holiday, combine trades happening Sunday evening, Monday and Tuesday into a single trading session, with just one settlement by the close of Tuesday's trade.
US weekly inventory reports are typically delayed by one day to Wednesday and Thursday on weeks when a holiday falls on Monday.
Oil fell on Friday, driving prices to their third weekly drop in four weeks after data showed the US non-manufacturing sector grew in August for an eighth straight month, but at a slower pace than in July and at a rate that was below expectations.
Investors in the crude market shrugged off equity rallies in Wall Street on Friday and in Asia on Monday after a separate report showed US employment dropped far less than expected and private hiring was a positive surprise.
The strength of equities based on expectations of future economic growth helped bolster oil prices and kept the focus off high US oil inventories for the past three months. Total US petroleum stockpiles are at their highest level since weekly records began in 1990.
G20 delegates agreed on Saturday that the global economic recovery would endure although the speed of expansion may slow, a South Korean official said.
As a reflection of an improving outlook for crude demand from emerging markets, Saudi Arabia raised its official selling prices (OSPs) for benchmark Arab Light and other grades to customers in Asia, the US and Europe in October, state oil company Saudi Aramco said on Sunday.
But money managers cut net-long positions in crude oil on the New York Mercantile Exchange for a fourth consecutive week, an indication that investors are decreasing bets that prices will rise. -Reuters