U.S. Oil Sheds Gains as Stocks, Data Weigh on Market

By Dow Jones Business News, May 15, 2014, 04:13:00 PM EDT

By Christian Berthelsen

U.S. oil prices fell Thursday in tandem with the stock market, as weak U.S. and global economic signals combined with near-record crude stockpiles to weigh on prices.

Light, sweet crude for June delivery fell 87 cents, or 0.8%, to close at $101.50 a barrel on the New York Mercantile Exchange, snapping a three-session winning streak that led to a three-week high a day earlier.

Oil prices have been rising on a combination of worries about supply disruptions as a result of tensions between Russia and Ukraine, and the potential of a reversal in U.S. policy that would allow crude exports. But Thursday's session offered little in the way of fundamental drivers that could sustain the rally.

The front-month June contract for Brent crude expired Thursday, rising 25 cents, or 0.2%, to $110.44 a barrel on the ICE Futures Europe exchange. Analysts said the gain was attributable to traders closing out bets that the contract would fall, by buying futures to cover their positions. Most of the volume in the Brent market has rolled forward into next month's contract, which settled down 22 cents, or 0.2%, at $109.09 a barrel.

On Thursday, the International Energy Agency raised its forecast of global oil demand for 2014 by 65,000 barrels a day, citing stronger consumption in the U.S. and upward revisions in Japan, Germany and the U.K. The agency now expects global oil demand to average 92.8 million barrels a day this year.

While the IEA forecast was a positive signal, other factors pressured oil prices lower. U.S. data released Wednesday showed overall crude domestic stocks rose to 398.5 million barrels, near all-time highs according to U.S. Energy Information Administration data going back to 1982, when analysts had been expecting no increase.

Economic data were also weak. First-quarter economic growth in the euro zone was reported at 0.2% on Thursday, below analyst expectations of 0.4%, sending a negative signal for oil demand. "People were expecting a bigger number," said Bill Baruch, senior market strategist at wholesale brokerage II Trader in Chicago.

In the U.S., a Federal Reserve reading on industrial production was weaker than expected and home builder confidence fell to its lowest level in a year, drowning out better-than-expected readings on initial jobless claims. And earnings for Wal-Mart Stores, often looked to as a barometer of U.S. economic activity, came in lower than expected, with revenue declining for the fifth consecutive quarter, dragging down stock indexes. The Dow Jones Industrial Average was down 1% in late trade Thursday.

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U.S. Oil Sheds Gains as Stocks, Data Weigh on Market