Oil drops below $75 on surprise US fuel inventory rise

LONDON — Oil fell below $75 a barrel yesterday, a day after hitting record highs, as a surprise increase in US gasoline inventories eased supply worries during peak summer demand.

By (Reuters)

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Published: Fri 7 Jul 2006, 12:15 PM

Last updated: Sat 4 Apr 2015, 3:00 PM

Gasoline stocks in the United States, which were expected to fall, rose by 700,000 barrels last week, a Department of Energy report said. But demand climbed despite high prices, gaining 1.4 per cent on the year in the last four weeks.

“The market is taking it kind of bearish because builds in gasoline at this time of year are not normal,” said Bill O’Grady, analyst at A.G. Edwards.

“But it does look like consumption is holding fairly well,” he added. “I’m not sure the report is all that bearish.”

US crude shed 69 cents to $74.50 a barrel by 1535GMT. London Brent crude was off 55 cents to $73.43.

US crude hit a record high of $75.40 on Wednesday, boosted in part by signs that US gasoline prices near $3 a gallon at the pump have yet to pinch the wallets of motorists in the world’s biggest energy user.

Investment funds, a key driver of a four-year crude oil rally that began at $20, remain convinced there is no end in sight to the bull market.

“It will be much more than $100 before the bull market is over,” US investor Jim Rogers told Reuters yesterday. He has predicted the current bull market has another 15 years to run.

Supply concerns raised by the row between key oil producer Iran and the West over Teheran’s atomic ambitions, along with a partial loss of Nigerian supply, had helped drive prices to the previous record at $75.35 in April.

Richard Batty, investment director at Standard Life Investments, said threats to supply were adding a premium of about $15 to prices and predicted oil will stay in a $55-$75 a barrel range.

“Events suggest it will stay at that level,” he told Reuters. “A lot of the upper part of that is about risk premium.”

Iran postponed a planned meeting on Wednesday with the European Union to discuss incentives to stop its uranium enrichment. They are now scheduled to meet in Brussels on Thursday and July 11.

Providing some relief from supply concerns, Opec’s oil output rose to a seventh-month high in June as Iraq began exporting crude from its northern fields after a break of almost a year, a Reuters survey found.

Crude production by the Organisation of the Petroleum Exporting Countries rose 240,000 bpd in June to 29.78 million bpd, the survey showed.

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