Oil prices extended losses to more than a dollar Wednesday after Federal Reserve Chairman Ben Bernanke in prepared remarks before a U.S. Senate panel said the economic outlook was "unusually uncertain," and that the Fed remained prepared to take further action as needed. U.S. light, sweet crude fell $1.02 to settle at $76.56 a barrel, after dropping as low as $76.31. The session high of $78.57. London Brent crude also fell slightly. Earlier in the day, crude futures fell back after the government reported a surprise increase in crude inventories last week. But losses were pared amid fears of a weather disturbance near the Dominican Republic turning into a storm and heading into the U.S. Gulf of Mexico's oil and natural gas production sites. The U.S. Energy Information Administration (EIA) said commercial crude inventories rose 360,000 barrels in the week to July 16 to 353.46 million barrels, confounding an average forecast of a fall of 1.4 million barrels.
Domestic gasoline inventories were up 1.12 million barrels at 222.15 million barrels, while analysts polled by Reuters had forecast a build of 900,000 barrels. Distillate stocks rose by a sharper 3.94 million barrels to 166.58 million barrels, compared with forecasts of a 1.7 million-barrel gain. "This report was negative across the board, with the unexpected build in crude stocks and the build in products too as refineries ramped up production,'' said Mike Zarembski, senior commodities analyst at Optionsxpress in Chicago. Before the EIA data, buoyant corporate earnings had raised raised optimism over the strength of U.S. economic recovery and pushed oil up to a high of $78.57. Results from U.S. investment bank Morgan Stanley and diversified U.S. manufacturer United Technologies both helped support sentiment, traders said.
Shares rose on Wednesday in Europe and Asia but were little changed in early Wall Street trading., with traders waiting for Federal Reserve Chairman Ben Bernanke's testimony to U.S. lawmakers in the afternoon. Some in the markets anticipate Bernanke may suggest steps to spur lending. On Tuesday, the U.S. National Hurricane Center estimated a 60 per cent likelihood that a tropical depression would form near Hispaniola. The storm could eventually reach the oil-rich Gulf of Mexico. If this were to hit production, it would likely support an oil price rally. The Center has forecast this year's Atlantic storm season may be the most intense since 2005, when hurricanes Katrina and Rita nearly paralysed U.S. oil output and refining along the Gulf coast.
China's oil demand growth accelerated to double digits in June, Reuters calculations of official data showed on Wednesday. The International Energy Agency this week described China as the world's biggest energy consumer, but China disputed this assessment. Meanwhile, BP rejected a Times of London report on Wednesday that chief executive Tony Hayward was to step down within the next 10 weeks. Shares of BP were higher in London trading and closed lower in New York trading Tuesday.
