Oil fell today, resuming last week's trend and erasing part of the previous session's gain of 1.6 per cent, on lingering worries about the US economy ahead of a Federal Reserve meeting later in the day.
US crude for October fell disproportionately to contracts further out, ahead of its expiry later today. It lost 53 cents to $74.33 a barrel by 0408 GMT, while the November contract shed 16 cents to $76.03.
Oil yesterday tracked a global rally in equities, but gains came in thin trade ahead of the Fed meeting, with total contracts changing hands on the New York Mercantile Exchange (NYMEX) about 25 per cent below the average volume over the last 30 days, according to Reuters data.
"The front month is heading to expiration date today, so liquidation is pressuring the market," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
"The overall market is not very bad, reflected by the second-month contract. Equity markets are coming back and the sentiment of investors is getting better than before, heading into the FOMC meeting today."
The US Federal Reserve is expected to tread water at a policy-setting meeting today with a renewed promise to keep its portfolio from shrinking but no new steps to ease monetary policy.
Japan's Nikkei average rose 0.6 per cent today, hitting a seven-week intraday high, with resource-related shares such as Mitsubishi Corp rising after oil, gold and other commodities rose the previous day. The SandP 500 hit a four-month high yesterday as Wall Street sought to extend a three-week rally.
ICE Brent for November dipped just 5 cents to $79.27, trading more than $3 higher than the equivalent contract for US crude. That premium had shrunk to less than $2 last week on expectations Midwest markets would tighten after a leak forced Enbrigde to shut the biggest Canada-US crude pipeline for more than a week.
Industry group the American Petroleum Institute will publish US oil inventory data for the week to September 17th this evening, followed by government statistics from the US Energy Information Administration tomorrow afternoon.
Crude inventories probably fell by 1.9 million barrels last week due to lower imports from Canada because of the Enbridge pipeline outage and as tankers navigated around stormy weather, a Reuters survey of analysts showed yesterday.
Distillate stocks, which include heating oil and diesel, were expected to have risen by about 300,000 barrels, after three weeks of drawdowns, the poll showed. Gasoline inventories were estimated to be little changed, off by only 100,000 barrels, according to the survey.
The US National Hurricane Center said there was a high or 90 per cent chance of a new tropical cyclone developing west of the Cape Verde Islands in the eastern Atlantic over the next 48 hours, as the 2010 Atlantic hurricane season continued at active pace.
Reuters