VIENNA, Austria, (AP) -Oil prices fell Thursday, reacting to a drop in global stock markets and expectations that a tropical storm would miss key oil and gas infrastructure in the Gulf of Mexico.
The storm concerns overshadowed Wednesday’s U.S. weekly government report that showed larger-than-expected declines in oil and gasoline inventories last week, but an increase in refinery activity that was in line with expectations. The decline in crude inventories supported higher oil prices, though the rest of the report was viewed as largely neutral, analysts said.
Light, sweet crude for September delivery lost $1.38 to $71.95 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract had risen 95 cents to settle at $73.33 a barrel Wednesday.
September Brent crude fell $1.36 to $70.28 a barrel on the ICE Futures exchange in London.
“The market’s focus is on storms right now but concerns over the equity market are still a major issue,” Phil Flynn, an oil analyst at Aaron Trading Corp., said in his daily note to clients.
Stock markets in Europe and Asia fell sharply Thursday following another tumble on Wall Street on persistent concerns over U.S. housing lend problems and their possible damage to global financial markets. In Europe, London’s FTSE 100 fell 2.7 percent below the 6,000 level and other major indexes were down more than 2 percent. In Asia, the Nikkei 225 index fell almost 2 percent and South Korea’s benchmark lost almost 7 percent.
In the U.S., a new forecast suggested Tropical Storm Dean could pass to the south of the Gulf of Mexico, missing the region entirely or returning much diminished in strength.
Traders had worried that Dean, bearing down on the Caribbean from the central Atlantic, could damage oil and gas infrastructure in the Gulf, cutting supplies. Dean is expected to become a hurricane on Thursday.
“The storm is on a projection for a path to stay pretty much south, there’s less likely to be great damage, so it’s seen as less of a threat to markets,” said Toxin Gory, a commodities strategist at the Commonwealth Bank of Australia in Sydney.
In the same vein, Vienna’s PVM Oil Associates said that the expectation that Dean will “spare the U.S. and drift more toward Central America … has eased tensions in the futures market.”
A second tropical storm in the Gulf south of Texas, Erin, is also not expected to have much impact on production.
In its inventory report, the Energy Information Administration said refinery utilization rose 0.5 percentage points to 91.8 percent of capacity in the week ended Aug. 10, in line with the expectations of analysts surveyed by Dow Jones Newswires. Refinery utilization fell by a surprise 2.3 percentage points the previous week.
Crude oil inventories fell 5.2 million barrels last week, the EIA said, and gasoline inventories dropped 1.1 million barrels. Analysts had expected crude stockpiles to fall 2.1 million barrels and gasoline inventories to fall 400,000 barrels.
Distillates, which include heating oil and diesel fuel, rose 200,000 barrels. Analysts had expected an increase of 1 million barrels.
Gasoline futures fell nearly 3 cents on Thursday to $1.9810 a gallon (3.8 liters) while heating oil futures declined by 4.81 cents to $1.9788 a gallon. Natural gas prices lost nearly 16 cents to fetch $6.707 per 1,000 cubic feet.