U.S. crude slump cools, market awaits inventory data
U.S. crude oil futures steadied on Tuesday after falling sharply a day earlier on worries about Greece's indebtedness and China's stock market losses, although charts indicated renewed selling could push prices into bear market territory.
Traders turned their attention to the possibility of an inventory decline in U.S. crude last week. A Reuters poll found expectations that U.S. government data on Wednesday could show a 700,000-barrel decline. Industry group American Petroleum Institute (API) estimated a drop of nearly 960,000 barrels. [EIA/S] [API/S]
U.S. crude CLc1 settled down 20 cents at $51.98 a barrel, a three-month low, and extending to more than 8 percent its drop since Thursday's close.
Brent LCOc1 settled up 31 cents at $56.85.
Both benchmarks gained in post-settlement trade, after the API suggested the higher-than-expected stockpile drop.
U.S. crude has fallen about 17 percent since its May high of $62.58. Further declines could push it toward the 20 percent sell-off required from the last major peak to constitute a bear market.
More downside momentum could also push it to test the six-year low of $42.03, set in mid-March, technical analysts said.
"There has been a lot of money looking to pile into the short-side, and there have been an accumulation of different triggers to cue that over a short time," said Paul Horsnell, head of commodities research at Standard Chartered in London.
"None of those work in isolation, but put them all together in a short period and they'll do it. And after that, the technicals kick in to give a further push down."
In early trading of oil on Tuesday, investors fled to the relative safety of the dollar and U.S. bonds as banks in Greece ran down to their last few days of cash after Greeks voted in a referendum to reject an international bailout. The dollar rose to a five-week high, weakening demand for dollar-denominated commodities from users of other currencies. [FRX/]
Chinese equities continued to drop in price, despite support measures from Beijing.
Also weighing on crude prices was Iran's determination to seal a nuclear deal with global powers to bring more supply to the market, as well as the restart of a key oil terminal in Libya.
While the U.S. oil complex was mostly under pressure, gasoline RBc1 rallied 1.3 percent and ultra-low sulfur diesel HOc1 rose too, proving the strength of fuel markets during the peak U.S. summer driving season.