Crude oil was little changed in New York after falling more than $4 a barrel yesterday, the biggest drop since March, on signs that record prices will prompt U.S. consumers to reduce fuel purchases.
Fuel consumption averaged 20.5 million barrels a day in the four weeks ended May 23, down 0.7 percent from a year earlier, the Energy Department said yesterday. The dollar reached a three-month high against the yen as U.S. stocks gained, brightening the economic outlook of the world's biggest energy consuming country and diminishing oil's appeal as a hedge.
Crude oil for July delivery fell 29 cents, or 0.2 percent, to $126.33 a barrel at 9 a.m. Sydney time in after-hours trading on the New York Mercantile Exchange. Yesterday, oil plunged $4.41, or 3.4 percent, to settle at $126.62 a barrel, the lowest close since May 16. It was the biggest drop since March 31. Futures reached a record $135.09 on May 22. Prices have more than doubled over the past year.
Crude oil inventories declined 8.88 million barrels to 311.6 million last week, the department reported. It was the biggest drop since Sept. 17, 2004 when Hurricane Ivan forced the closure of U.S. oil platforms in the Gulf of Mexico.
U.S. gasoline demand dropped 5.5 percent last week as prices at the pump reached records, according to MasterCard Inc., the second-biggest credit-card company.
Indonesia, Taiwan, Sri Lanka and Pakistan have decided to raise fuel prices as the cost of subsidies mounts, and Malaysia plans to announce a revision to its subsidies on May 30. India's Oil Secretary M.S. Srinivasan said higher domestic gasoline and diesel prices are inevitable because of rising global prices.
Brent crude oil for July settlement declined $4.04, or 3.1 percent yesterday, to settle at $126.89 a barrel on London's ICE Futures Europe exchange. The contract touched a record $135.14 on May 22.
The dollar's strength and the outlook for higher U.S. interest rates are putting pressure on prices.
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