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Crude oil comes off 16-month high after bearish IEA report

Published 07/11/2013, 09:03 AM
Updated 07/11/2013, 09:03 AM

Investing.com - Crude oil futures turned lower on Thursday, coming off a 16-month high following the release of a mostly bearish report from the International Energy Agency on global oil supply and demand earlier in the day.

Prices rose to the highest level since March 2012 overnight as the U.S. dollar tumbled following dovish comments from Federal Reserve Chairman Ben Bernanke.

On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD105.83 a barrel during U.S. morning trade, down 0.65% on the day.

New York-traded oil prices fell by as much as 1.1% earlier in the day to hit a session low of USD105.36.

In its monthly report released earlier in the session, the IEA said that oil supplies from countries outside the Organization of the Petroleum Exporting Countries will rise by 1.3 million barrels a day in 2014, an annual growth rate that “has only been achieved once in the last twenty years.”

The IEA added that global demand if forecast to rise by 1.2 barrels a day next year.

Prices also came under pressure after data showed that the number of people who filed for unemployment assistance in the U.S. rose to the highest level in two months last week.

The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending July 6 rose by 16,000 to a seasonally adjusted 360,000, compared to expectations for a drop of 4,000 to 340,000.

Jobless claims for the preceding week were revised up to a gain of 344,000, from a previously reported 343,000.

NY-traded oil futures rallied to USD107.45 a barrel earlier, the strongest level since March 27, 2012, after Fed Chair Bernanke said that “highly accommodative” monetary policy will be needed for the “foreseeable future.”

The comments came after the minutes of the central bank’s June policy meeting showed that Fed policymakers remain divided over when to begin tapering its USD85 billion-a-month asset purchase program.

Around half of Fed policymakers believe the bank should start to scale back bond purchases by the end of the year, while others believe the labor market still remains too weak.

The U.S. dollar came under broad selling pressure as expectations grew the Federal Reserve would keep its loose monetary policy in place.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 1% to trade at 83.38.

Oil prices were also supported after Wednesday’s bullish U.S. inventory report showed that crude oil inventories fell by 9.9 million barrels last week, compared to expectations for a decline of 3.3 million barrels.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery dipped 0.1% to trade at USD108.44 a barrel, with the spread between the Brent and crude contracts standing at USD2.61 a barrel.

The gap between the contracts shrunk to the narrowest level since November 2010 earlier, amid an improving production outlook in the North Sea and indications of declining stockpiles at Cushing, Oklahoma, the delivery point for Nymex oil futures.

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