Crude oil fell for a third day after a government report showed an unexpected increase in U.S. oil and gasoline inventories.
U.S. gasoline supplies rose 1.5 million barrels to 214.2 million in the week ended July 14, according to the Energy Department. Crude oil stockpiles rose 151,000 barrels to 335.5 million. Prices surged to a record last week on concern that the conflict between Israel and Hezbollah would spread through the Middle East, source of a third of the world's oil.
``We are in pretty good shape as far as supplies are concerned,'' said Justin Fohsz, a broker at Starsupply Petroleum, a division of GFI Group Inc., in Englewood, New Jersey. ``As long as there is violence in the Middle East the market will be on edge. Prices can move sharply one way or another on a dime based on the latest headlines.''
Crude oil for August delivery fell $1.39, or 1.9 percent, to $72.15 a barrel at 11:32 a.m. on the New York Mercantile Exchange. The contract touched $71.80, the lowest since June 28. Futures reached $78.40 on July 14, the highest since trading began in 1983. Prices are up 25 percent from a year ago.
Gasoline for August delivery declined 5.7 cents, or 2.5 percent, to $2.21 a gallon in New York. Prices are up 32 percent from a year ago.
U.S. gasoline stockpiles were expected to fall 875,000 barrels, according to the median of forecasts by 16 analysts surveyed by Bloomberg News. Inventories declined 1.3 million barrels during the same week last year, according to Energy Department figures. Crude oil supplies were expected to drop 650,000 barrels.
Gasoline inventories are up 1.3 percent from the five-year average for the week, the department said. Crude oil stockpiles are up 9.5 percent from the five-year average.
Israeli Offensive
Israel began bombarding Lebanon after Hezbollah forces kidnapped two Israeli soldiers on July 12. Prices surged in 1974, helping spur a recession in the developed world, after an oil embargo that followed the Arab-Israeli war in October 1973. The Middle East holds 62 percent of global reserves, according to BP Plc.
``Some Israeli comments hint that the end of this operation is in sight,'' said Craig Pennington, global head of energy research at Schroder Investment Management Ltd. in London. ``The situation is bad but the actual threat to oil shipments is far less than thought last week.''
Iran warned Israel against attacking Syria, saying it will face the ``greatest damage'' if it does. Iran's foreign ministry said on July 16 that Iran's support for Lebanon, Syria and the Palestinians was only ``humanitarian and spiritual,'' rejecting Israeli allegations that it sent missile technology and military personnel to support Hezbollah fighters in southern Lebanon.
A Blunt Weapon
``I believe Iran is quite willing to use oil as a weapon but not in this case,'' Pennington said. ``It's too blunt a weapon and Iran wouldn't want to cut supplies to countries like China and Japan, which are not involved in the issue.''
Prices jumped 18 percent this year amid concern Iran, the fourth-largest producer, might cut exports because of efforts to curb its nuclear program. The United Nations Security Council is meeting this week to work on a draft resolution demanding the suspension of Iran's uranium-enrichment program, which the U.S. suspects is cover for the development of nuclear weapons.
Brent crude oil for September settlement fell $1.22, or 1.6 percent, to $73.14 a barrel on the London-based ICE Futures exchange.
U.S. gasoline supplies rose 1.5 million barrels to 214.2 million in the week ended July 14, according to the Energy Department. Crude oil stockpiles rose 151,000 barrels to 335.5 million. Prices surged to a record last week on concern that the conflict between Israel and Hezbollah would spread through the Middle East, source of a third of the world's oil.
``We are in pretty good shape as far as supplies are concerned,'' said Justin Fohsz, a broker at Starsupply Petroleum, a division of GFI Group Inc., in Englewood, New Jersey. ``As long as there is violence in the Middle East the market will be on edge. Prices can move sharply one way or another on a dime based on the latest headlines.''
Crude oil for August delivery fell $1.39, or 1.9 percent, to $72.15 a barrel at 11:32 a.m. on the New York Mercantile Exchange. The contract touched $71.80, the lowest since June 28. Futures reached $78.40 on July 14, the highest since trading began in 1983. Prices are up 25 percent from a year ago.
Gasoline for August delivery declined 5.7 cents, or 2.5 percent, to $2.21 a gallon in New York. Prices are up 32 percent from a year ago.
U.S. gasoline stockpiles were expected to fall 875,000 barrels, according to the median of forecasts by 16 analysts surveyed by Bloomberg News. Inventories declined 1.3 million barrels during the same week last year, according to Energy Department figures. Crude oil supplies were expected to drop 650,000 barrels.
Gasoline inventories are up 1.3 percent from the five-year average for the week, the department said. Crude oil stockpiles are up 9.5 percent from the five-year average.
Israeli Offensive
Israel began bombarding Lebanon after Hezbollah forces kidnapped two Israeli soldiers on July 12. Prices surged in 1974, helping spur a recession in the developed world, after an oil embargo that followed the Arab-Israeli war in October 1973. The Middle East holds 62 percent of global reserves, according to BP Plc.
``Some Israeli comments hint that the end of this operation is in sight,'' said Craig Pennington, global head of energy research at Schroder Investment Management Ltd. in London. ``The situation is bad but the actual threat to oil shipments is far less than thought last week.''
Iran warned Israel against attacking Syria, saying it will face the ``greatest damage'' if it does. Iran's foreign ministry said on July 16 that Iran's support for Lebanon, Syria and the Palestinians was only ``humanitarian and spiritual,'' rejecting Israeli allegations that it sent missile technology and military personnel to support Hezbollah fighters in southern Lebanon.
A Blunt Weapon
``I believe Iran is quite willing to use oil as a weapon but not in this case,'' Pennington said. ``It's too blunt a weapon and Iran wouldn't want to cut supplies to countries like China and Japan, which are not involved in the issue.''
Prices jumped 18 percent this year amid concern Iran, the fourth-largest producer, might cut exports because of efforts to curb its nuclear program. The United Nations Security Council is meeting this week to work on a draft resolution demanding the suspension of Iran's uranium-enrichment program, which the U.S. suspects is cover for the development of nuclear weapons.
Brent crude oil for September settlement fell $1.22, or 1.6 percent, to $73.14 a barrel on the London-based ICE Futures exchange.
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