Oil fell for a second day on Wednesday toward $77 after an unexpected increase in U.S. crude stockpiles and a drop in U.S. consumer confidence fueled doubts about recovery in energy demand.
U.S. crude for September fell as much as 0.8 percent to $76.88 a barrel, trading down 17 cents at $77.33 at 1:26 a.m. ET. ICE Brent slipped 3 cents to $76.10 as a recent rally in Asian stock markets lost steam.
Prices on Tuesday touched $79.69, the highest in almost 12 weeks, boosted by Wall Street gains amid strong earnings by companies including DuPont and Co (DD.N), before a report showing U.S. consumers in July were the least confident about the economy since February because of worries of a stagnant job market.
The mood of the market changes every few days, with waves of bullishness and bearishness continuing, said Keichi Sano, general manager of research at SCM Securities in Tokyo.
The American Petroleum Institute said the nation's crude inventories posted a surprise increase of 3.1 million barrels last week, compared to a forecast decline of 1.6 million barrels. Figures from the U.S. Department of Energy on stocks and demand will be released at 10:30 a.m. ET on Wednesday.
Those statistics are forecast to show U.S. crude oil inventories fell last week on a slip in imports and possibly some reduced production because of a storm threat in the Gulf of Mexico, a Reuters poll of analysts showed on Tuesday.
RISING SUPPLY TREND
Refined products stockpiles were forecast to continue to show increases. For distillates, which include heating oil and diesel, the forecast was for a gain of 1.8 million barrels, the ninth consecutive weekly gain, while for gasoline, stocks should be up 400,000 barrels, the fifth straight increase in the middle of the U.S. summer driving demand season.
The Organization of the Petroleum Exporting Countries (OPEC) has for the past year and a half expressed a preference for prices to remain stable around $75, saying that encourages investment to sustain and increase production capacity and does not threaten the economic recovery.
I don't know what can be the trigger for a breakout from this range, Sano said, referring to the $70-$80 a barrel range, within which U.S. crude has traded for nearly two months.
I don't feel any strong energy. People are satisfied with range-trading. With low volumes, day-to-day activity is going to be choppy.
Oil on Tuesday approached $80 a barrel as world stocks reached 2-½ month highs. The failure to break above that level was deemed by traders and analysts as a bearish signal.