Oil Drops After USD Strength and Rise in Inventories

West Texas Intermediate headed for its biggest weekly decline since January amid signs of weaker fuel demand in the U.S., the world’s biggest oil consumer. Its discount to Brent crude widened to the most in five weeks.

Futures traded in New York declined 4.4 percent this week as the dollar strengthened before data on U.S. employment today. The nation’s gasoline inventories rose to the highest level in four months last week as demand fell and crude output advanced to the highest since 1986 in early July, government data show. Brent is poised for a weekly decline amid speculation that energy supplies from Russia will be unaffected by further sanctions over Ukraine.

“Demand has been a bit sluggish,” Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna, said by e-mail. “Shale oil growth in the U.S. and oil sands in Canada lead to the situation that geopolitical tensions are not weighing that strongly as in the past. It’s always about risk aversion too.”

WTI for September delivery declined as much as 73 cents to $97.44 a barrel in electronic trading on the New York Mercantile Exchange, trading for $97.53 at 9:49 a.m. London time. The volume of all futures traded was about 9 percent above the 100-day average for the time of day. Prices slid 6.8 percent last month, the most since May 2012.

Brent for September settlement fell 18 cents to $105.84 a barrel on the London-based ICE Futures Europe exchange. Prices are down 2.4 percent this week. The European benchmark crude was at a premium of as much as $8.33 to WTI, the widest on an intraday basis since June 24.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza