Crude oil futures were weaker early Wednesday ahead of the release of U.S. weekly oil inventory data and lingering worries over the Greek debt crisis.
U.S. crude slipped below $90 a barrel, after settling above that level Tuesday for the first time since Aug. 3, while North Sea Brent was up modestly, supported by near-term tight supplies in Europe.
The nervous pause after a $2-rise in U.S. futures comes as the leaders of Germany and France said they would hold a conference call later in the day with Greece's prime minister over that nation's debt crisis. Worries over the impact of a potential Greek default on the euro-zone economies and the global economy escalated, as Moody's Investors Service cut the credit ratings of two French banks, Societe Generale (GLE.FR) and Credit Agricole (ACA.FR), because of their exposure to Greek debt.
For all markets, that came against the backdrop of the International Energy Agency's move Tuesday to revise down its global oil demand projections for this year and next on a weaker economic outlook.
Light, sweet crude oil for October delivery on the New York Mercantile Exchange was 51 cents lower, at $89.70 a barrel, after trading in a range of $88.53 to $90.25 since Tuesday's settlement.
ICE October Brent crude was 43 cents higher, at $112.32 a barrel.
Short-term price cues will come from the Energy Information Administration's weekly report on U.S. oil demand and inventories, due out at 10:30 a.m. EDT. In a similar survey released late Tuesday afternoon, the American Petroleum Institute said crude oil stocks fell by 5.052 million barrels in the week ended Sept. 9, well beyond the 3.1-million-barrel decline forecast in a survey of analysts by Dow Jones Newswires.
The drop in crude stocks came as the Gulf Coast refining region was feeling the effects of Tropical Storm Lee, which reduced imports.
Traders said the API report was mixed overall, with a sharp drop of 1.8 percentage points in the refinery operating rate in the week showing lower demand for crude and offsetting the impact of the larger-than-expected decline. The trade group also said gasoline stocks rose by 2.758 million barrels, far more than the expected 500,000-barrel drop. Distillate stocks (diesel/heating oil) rose by 67,000 barrels, below the expected increase of 500,000 barrels.
Jim Ritterbusch, president of Ritterbusch and Associates, noted that declining crude oil inventories are typical at this time of year, as refiners prepare to lower operations for seasonal maintenance work on facilities. He cautioned that a sharp rise in gasoline inventories would expand a growing surplus to five-year average levels and may pressure refiners to make greater reductions in operations. Traders said that would add to downward pressure on crude prices.
Retail gasoline prices, which were about one-third higher than a year ago in the peak summer driving season, slashed demand, forcing refiners to boost exports to work off high inventories. U.S. gasoline demand fell 2.4% last week to the lowest level since February and the weakest driving-season level since 2005, according to a SpendingPulse report released Tuesday by MasterCard Advisors LLC.
Reformulated gasoline blendstocks futures for October were 0.64 cent lower, at $2.7360 a gallon. Heating oil for October delivery was 0.44 cent higher, at $2.9405 a gallon.