Mark M. Martiak
Managing Director Investments, AIF®

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© 2018 Mark Martiak, AIF®  |Managing Director Investments

The Oil Story: Weak Demand & High Inventory Levels

Friday, May 11, 2012

Oil fell below $100 a barrel for the first time since February as U.S. employers added fewer workers than forecast, causing concern that demand won’t be enough to cap inventories at their highest level in 21 years.

Last Friday (May 4th, 2012), the oil market remained focused on the economy, Crude oil for June delivery dropped $4.82, or 4.7 percent, to $97.72 a barrel at 12:58 p.m. on the New York Mercantile Exchange. The contract touched $97.51, the lowest level since Feb. 10. Prices are down 6.9 percent this week, heading for the biggest weekly decline since September 2011.

 

Brent oil for June settlement fell $3.66, or 3.2 percent, to $112.42 a barrel on the London-based ICE Futures Europe exchange. The contract reached $111.76, the lowest level since Feb. 2. The European benchmark contract’s premium to New York futures widened to $14.70 from $13.54 yesterday.

 

• The Standard & Poor’s GSCI Index of 24 commodities was down 2.8 percent, heading for the biggest decline since April 4th. The drop was led by crude.
• Oil in New York climbed to a five-week intraday high of $106.43 on May 1 after a report showed that U.S. manufacturing increased at the fastest pace in 10 months.
• The fall in prices accelerated after breaking through technical support along its 100-day moving average, data compiled by Bloomberg showed. The indicator stands at $102.36 a barrel today. Buy and sell orders tend to be clustered near chart-support levels.
• U.S. crude stockpiles increased 2.84 million barrels to 375.9 million in the seven days ended April 27, the most since September 1990, according to an Energy Department report May 2. Domestic output gained 8,000 barrels a day to 6.12 million, the highest level since November 1999, the report showed.
Fuel Demand
• Gasoline consumption fell 0.3 percent to an average 8.66 million barrels a day in the four weeks ended April 27, leaving demand 4.7 percent lower than a year earlier, according to the department.
• Oil above $100 is not sustainable with the economy in this condition.
• Oil in New York has fallen 12 percent from a March 1 peak of $110.55 a barrel as tensions have eased between Iran and Western nations over the country’s nuclear program.
• Oil falling below $100 will have an impact on consumer confidence as it signals some relief from high prices headed into the Memorial Day weekend later this month.
• Gasoline for June delivery dropped 9.65 cents, or 3.2 percent, to $2.9535 a gallon in New York. The contract touched $2.9407, the lowest level since Feb. 8.

 

Pump Price
The national average retail price of unleaded regular gasoline in the U.S. fell 0.1 cent to $3.802 a gallon yesterday, according to a daily survey by AAA, the country’s largest motoring organization. That’s down from $3.936 on April 4th.


Oil may extend losses next week, according to a Bloomberg survey. Prices will decline, according to 18 of 33 analysts and traders surveyed. Eleven respondents, or 33 percent, predicted futures will rise and four estimated they will be unchanged.

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