Oil eases to $77 after mixed US supply report

Oil eased to around $77 a barrel on Wednesday, falling from a two-week high, after a US government report showed rising fuel supplies and declining retail sales weighed on equities.
Gasoline inventories rose 1.6 million barrels and distillates by 2.94 million barrels, the Energy Information Administration said, more than expected. Crude stocks fell a more than expected 5.06 million barrels.
“Of course the drop in crude stocks is a bullish factor, but that may be somewhat offset by builds in products,” said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
“For the crude market, this probably isn’t a game-changer. I expect we will continue to track equities markets.”
US crude fell 20 cents to $76.95 at 1506 GMT, retreating from a two-week intraday high of $77.37 on Tuesday. Brent crude was down 8 cents to $76.57.
The EIA report released at 1430 GMT told a different story to that of industry group the American Petroleum Institute, which on Tuesday said US crude stockpiles rose by 1.7 million barrels.
Oil also fell as US equities wavered after six sessions of gains after data showed a second straight month of declining US retail sales, though results from Intel Corp helped limit losses on the Nasdaq.
Crude and US equities have become more closely correlated this month. Investors often see the strength of equities as an indication of wider economic health and future demand for oil and energy.
Oil in New York was just below its 200-day moving average of $77.39. Technical analysts, who study past price moves to predict future direction, said this was acting as a bulwark that was proving difficult to breach.
But they added that if oil went above this level, it would draw strength from having surpassed it.
“The line to conquer for the bulls today will be the resistance of the 200-day moving average,” said Olivier Jakob of Petromatrix in Zug, Switzerland.

Copyright Reuters, 2010