Oil falls below $102 ahead of U.S. supply reports
Oil prices fell below $102 a barrel Tuesday as traders anticipated a further rise in weekly U.S. crude inventories, a sign of weakening demand in the world's largest economy.
By early afternoon in Europe, benchmark crude for June delivery was down 90 cents to $101.65 a barrel in electronic trading on the New York Mercantile Exchange after earlier trading as low as $100.12. On Monday, the contract surged $5.37 to settle at $102.55.
In London, Brent crude for June delivery was down 58 cents to $115.32 a barrel on the ICE Futures exchange.
Oil rose Monday after a steep 15 percent fall last week but traders took profits Tuesday ahead of weekly U.S. energy data and after U.S. exchange operator CME Group said it is raising the margin requirements for trade in a wide range of oil products.
"As of today, 25 percent more collateral has to be deposited on the purchase of a (Nymex) contract and 23.8 percent more on buying a Brent contract," said analysts at Commerzbank in Frankfurt. "This will make it less attractive for speculators to bet on rising oil prices."
Crude inventories likely rose 1.6 million barrels last week, continuing an uptrend since early January, according to analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute is scheduled to announce its inventory numbers later Tuesday while the Energy Department's Energy Information Administration reports its weekly supply data Wednesday.
"Crude supplies are expected to show a small build due largely to a continued strong import pace that should more than offset increased demand from the refinery system," said oil analyst Jim Ritterbusch in a report.
Other analysts expect oil prices to continue gaining due to renewed strength in stock markets, continued strong Chinese demand and OPEC output restraint. Ritterbusch and Associates said dramatic oil price swings are likely to continue this month, pegging it at a low of $92 and fresh high above $115 a barrel.
In other Nymex trading in June contracts, heating oil shed 1.66 cents to $2.9452 a gallon and natural gas futures were up 2.3 cents at $4.177 per 1,000 cubic feet. Gasoline futures gained 9.11 cents to $3.3695 a gallon.