(Bloomberg) -- Crude dropped with equities on a gloomy outlook for the global economy and amid signs that oil stockpiles remain ample.
Futures fell as much as 4.6 percent in New York as stock markets declined. Nigerian oil output rose last month following repairs to infrastructure that had been damaged by militant attacks, a Bloomberg survey showed, while gasoline supplies on the U.S. East Coast reached a record, the government said. Gasoline futures dropped to the lowest price in more than two months.
"The path of least resistance is lower," said Michael Wittner, the New York-based head of oil-market research at Societe Generale SA. "The long-term picture remains bullish but in the short-term, crude is coming back from the disruptions. We have a lot of crude to work off as well."
Crude has risen about 80 percent from a 12-year low in February amid supply disruptions and falling U.S. output. Yet the price rebound has spurred activity in the American shale patch, where drillers last week brought back the most oil rigs of any week this year. Contango, the structure where prices for delivery today are lower than those in future months, is shrinking, a sign that stockpiles are plentiful.
West Texas Intermediate for August delivery slipped $2.22, or 4.5 percent, to $46.77 a barrel at 11:13 a.m. on the New York Mercantile Exchange. There was no settlement on the Nymex Monday because of the U.S. Independence Day holiday. Trades will be booked Tuesday for settlement purposes.
Risk Off
Brent for September settlement fell $2.16, or 4.3 percent to $47.94 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a 48-cent premium to WTI for the same month.
"It's a risk-off day across the markets," said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. "OPEC production estimates are making the rounds and they're showing a rise in Nigerian production, which is negative for the oil market. The contango is coming in, which is the classic sign of oversupply."
Nigeria pumped an average of 1.53 million barrels a day in June, up about 90,000 a day from May, according to the Bloomberg survey. Militants have resurfaced this month, with the Niger Delta Avengers group claiming attacks on five crude-pumping facilities overnight Sunday.
Saudi Output
Production in Saudi Arabia, the biggest crude exporter, rose by 70,000 barrels a day to 10.33 million last month, the survey showed. The kingdom typically burns more crude in the summer to generate electricity for air conditioners. Libya raised output by 40,000 barrels a day to 320,000.
Gasoline stockpiles along the U.S. East Coast surged to a record 72.5 million barrels in the week ended June 24, data from the Energy Information Administration show. Imports to the region jumped to a six-year seasonal high. U.S. gasoline production hit a record the previous week as refineries bolstered operations to meet driving-season demand.
The EIA said in a monthly report on June 30 that gasoline demand in April was 9.21 million barrels a day, down from 9.49 million that had been estimated in weekly data.
"The April data raised questions about the strength of gasoline demand," Wittner said. "While gasoline demand is strong, it's starting to look less spectacular than earlier thought."
August gasoline futures dropped 5 percent to $1.4375 a gallon. Earlier, the contract touched $1.4312, the lowest since April 18.
- Three attacks hit Saudi Arabia on Monday: one near a Shiite mosque in the eastern city of Qatif, another near the U.S. consulate in Jeddah and a third outside the courtyard of the Prophet's Mosque in Medina.
- Chevron Corp. has decided to go ahead with the $36.8 billion expansion of the Tengiz oil project in Kazakhstan.
- Crude prices won't rise much further over the next year and a half as demand growth slows and refiners comfortably meet gasoline consumption, Vitol Group Chief Executive Officer Ian Taylor said in a Bloomberg Television interview.
- The end of a split in Libya's National Oil Corp. marks a small step toward healing the divided country, but the political stalemate that shut down most of its crude production is as entrenched as ever.
--With assistance from Grant Smith To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net. To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, David Marino at dmarino4@bloomberg.net, Anne Riley, Carlos Caminada
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