UPDATE 9-Oil drops on gasoline glut, falls more on Fed minutes

Thu May 23, 2013 2:47am IST

Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

* Higher U.S. gasoline, crude stocks weigh on prices

* U.S. equities fall on Fed minutes

* Dollar hits 4-1/2-year high versus yen (Updates lead, clarifies equity trading patterns)

By Anna Louie Sussman

NEW YORK, May 22 (Reuters) - Oil prices fell on Wednesday as a rise in U.S. gasoline inventories prompted selling, then crude extended losses in late trading after minutes from a Federal Reserve policy meeting sent U.S. stock markets down.

U.S. equities fell in choppy trading, with the Dow briefly down more than 1 percent, after the Fed released minutes of its April 30-May 1 meeting. The minutes indicated a debate over how soon to start scaling back the central bank's bond-buying program of economic stimulus.

Brent crude futures fell $1.31 to settle at $102.60, after shedding nearly a dollar in the previous session. Brent prices fell further in post-settlement trading, down $1.52 at 4:54 p.m. EDT (2054 GMT).

U.S. crude settled down $1.90 at $94.28 a barrel, its biggest one-day loss since May 1. It extended losses in post-settlement trading, sliding as low as $94.01.

"You had a couple of Fed governors talking about ending quantitative easing as early as June, and because of that, people are thinking 'Oh, the Fed is done,'" said Mark Waggoner, president at Excel Futures in Bend, Oregon.

"If there's uncertainty, people want to take profits off of these highs. Then if the economy slows, demand slows for crude oil."

Earlier, the U.S. government's Energy Information Administration said gasoline inventories rose by 3 million barrels last week, suggesting the U.S. domestic fuel market was well supplied for the peak driving season.

U.S. crude inventories fell by 338,000 barrels, the EIA report showed, but stocks at the Cushing, Oklahoma, crude storage hub rose 449,000 barrels to 50.172 million barrels.

Analysts had expected crude stocks to drop by 800,000 barrels and gasoline stocks to remain unchanged from a week ago.

"The fundamental picture remains weak, and that seems to be what's weighing on the market," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut.

"Every time we approach $98 on U.S. crude, the fundamentals drag the market back towards $90."

U.S. gasoline fell 2.5 cents to $2.82 a gallon, having hit a session low of $2.79. Gasoline has slid nearly 4 percent since May 17, when it touched $2.93, its highest in a month.

"Concerns over inventories had produced the recent rally, and gasoline's strength spilled over into the rest of the complex," said John Kilduff, partner at Again Capital in New York.

FED OFFICIALS SEEK "MORE CONFIDENCE"

Many Federal Reserve officials earlier this month wanted to see more evidence that the U.S. economy was recovering before shifting toward a tapering of their bond purchase program, the Fed said on Wednesday.

The U.S. central bank's three quantitative easing (QE) programs have released hundreds of billions of dollars into money markets over the last four years, boosting many commodities including oil.

Earlier in the day, the dollar rallied to a 4-1/2-year high against the yen and a near three-year peak against a currency basket after Bernanke stoked speculation the central bank could begin slowing its asset buying in coming months.

Investors will watch on Thursday for May's initial purchasing managers indexes for signs of economic revival in the three key consumer regions: China, the United States and the euro zone. Reuters surveys suggest they may show a slight pickup from April but not enough to dispel fears of a sluggish outlook.

(Additional reporting by Robert Gibbons, Sabina Zawadski in New York, Christopher Johnson and Simon Falush in London, Ramya Venugopal in Chennai, India; Editing by David Gregorio and Dale Hudson)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Election 2014

Election 2014

Kashmiris wary as Modi challenges for power.  Full Article 

Facebook's Performance

Facebook's Performance

Facebook Q1 revenue grows 72 percent on rising mobile ads.  Full Article 

Earnings Season

Earnings Season

Bharti Infratel Q4 net profit jumps 64 percent.  Full Article 

Monsoon Forecast

Monsoon Forecast

South Asia monsoon seen below-average to average in 2014 - WMO.  Full Article 

Solar Dispute

Solar Dispute

Green groups urge U.S. to drop solar trade case against India.  Full Article 

Oil Imports

Oil Imports

India to make May-July oil payments to Iran - sources.  Full Article 

Rice Exports

Rice Exports

India may cede top rice exporter spot under Southeast Asian price onslaught.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage