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| Utility companies are raking in revenue as power usage soars due to a heat wave. CNN's Andy Serwer explains. (July 27) |
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NEW YORK (CNN/Money) -
Oil prices slipped Wednesday, reversing an earlier climb, after a report showed distillate stocks rising more than expected.
U.S. crude for September delivery edged down 9 cents to settle at $59.11 a barrel on the New York Mercantile Exchange.
Distillate stocks, from which heating oil and diesel fuel are made, rose by 3.1 million barrels for the week ended July 22, the Department of Energy said Wednesday.
Analysts, concerned with the number as refineries gear up for the winter heating season, had predicted a 1.7 million barrel increase, according to Reuters.
"The big build in distillates is what's going to be putting a lid on this market," said Nauman Barakat, a trader at Refco in New York. "I think we are probably due for a big correction."
The report said crude stocks fell by 2.3 million barrels, in line with estimates.
But the drop was minimal, supported by gasoline stocks, which fell by 2.1 million barrels, much more than the 800,000 expected.
And concerns about potential supply disruptions were sparked again on Wednesday after a fire destroyed Indian Oil and Natural Gas Corp's 100,000 barrels per day Bombay High Platform on Wednesday.
Production will be down for several months. Up to 300 people may be trapped at the facility.
Oil had moved little before the report, edging higher, as traders awaited guidance from the numbers.
Over the last few days crude has climbed back from lows of around $56 a barrel as anxiety grew over the active and early start of the Atlantic hurricane season, which often hurls storms into the Gulf of Mexico. Almost a quarter of U.S. domestic oil production comes from the Gulf and several major import terminals are located in Gulf Coast states.
The focus on U.S. weather has overshadowed weakness in the latest batch of Chinese oil data, which showed implied oil demand from the world's second largest consumer rising only 0.7 percent from last June, far below full-year estimates.
However, many analysts expect a rebound in growth in the second half of the year, pointing to an unexpectedly strong 9.5 percent rise in second-quarter GDP and a retail prices increase that should encourage refiners to sell more fuel domestically.
The Organization of the Petroleum Exporting Countries (OPEC) has been powerless to restrain oil's surge, which has added more than 35 percent to prices since the start of the year. (Is OPEC obsolete? Click here.)
OPEC is pumping at its highest rate in 25 years, but says it can do nothing to address the shortage of refining capacity in consuming countries that is keeping prices high.
Iran's Oil Minister Bijan Zanganeh said Tuesday that the market had no need for the extra 500,000 bpd of crude supply the cartel has considered adding to markets.
-- from staff and wire reports
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