Crude oil price plummeted to 76.52, the lowest in a month, Thursday as huge builds in crude and oil product inventories were bearish signs for demand recovery. The benchmark contract close -2.9% lower at 7.694 for the day. Today in Asia, the black gold extends yesterday's selloff and slides to as low as 76.
According to the US Energy Department, crude inventory rose +1.76 mmb in the week ended November 6 with the Midwest leading the build. Oil inventory in that region surged +2.1 mmb of which 1.4 mmb was from Cushing, Oklahoma. Other regions also showed modest builds with decline only seen in the East Coast. Refinery runs dropped to 79.9%, the lowest in a year although many facilities have resumed operations after maintenance. This was probably driven by abundant fuel stocks.
The biggest disappointed came from gasoline stockpiles which surged +2.56 mmb. Gasoline demand fell -1.9% from a week ago to 8.844M bpd. The reading was also -1.7% below the level a year ago. 4-week average at 8.917M bpd represented declines of -1.1% and -1.5% on weekly and annual basis respectively.
Distillate inventories climbed -0.35 mmb, the first increase in 5 weeks, as demand slipped. Weather in the Northeast was warmer-than-expected in November and this dampened demand for heating oil.
Stock markets in the US also retreated as driven by slumps in energy shares. The Dow Jones Industrial Average lost -0.9% to 10197 while S&P 500 Index slipped -1% to 1101.9. Energy shares such as Southwestern Energy Corp and Range Resources dropped more than -4% because the weak inventory report reflected poor energy fundamentals.
Gold price got hammered after rallying to fresh record of 1123.4. Heavy selling pressure was seen and the December contract plunged to an intraday low of 1102.7 before recovering to 1106.6, down -0.7%. In Asia session Friday, sellers initially dragged price lower to 1101.2 but some started to accumulate the precious metal as price approached 1100. Currently trading at 1105.7, gold will likely consolidate around this level today.
Apart from profit-taking, the key driver for gold's decline was rebound in the dollar. The USD index advanced +0.8% yesterday after sliding to a 15-month low earlier. The dollar soared against major currencies as initial jobless claims fell to 502K in the latest week, compared with consensus of 510K, from 514K in the prior month. Moreover, US Treasury Secretary Timothy Geithner's speech that it's very important to maintain a strong dollar also helps lifting USD.