Oil prices declined today as equity markets continued plummeting to raise concerns about the strength of the ongoing economic recovery and crude demand. Investors are worried that the debt crisis that has caused Greece to request a multi-billion aid package from the EU and the International Monetary Fund (IMF) and implement a series of economic austerity measures to cause public unrest could spread into other euro zone states, most notable Spain and Portugal, which have recently been downgraded by leading rating agencies along with Greece.
Adding pressure on the stocks and the banking sector was news from Germany, which banned naked short selling of certain euro denominated financial instruments, and the US, which passed a large scale financial regulatory reform.
The negative trends in the markets have offset the impact from this week’s inventories reports, which surprisingly indicated growing oil demand in the US following months of declines.
The American Petroleum Institute (API) reported a surprising decline in US crude stockpiles of nearly 0.8 million barrels, while an increase was expected. A more closely watched report from Energy Information Administration (EIA) showed a smaller than expected increase of 200,000 barrels in US stockpiles. EIA also said that gasoline stocks shed 300,000 barrels and distillates, which include diesel and heating oil, were down by 1 million barrels. At the same time, oil stockpiles at Cushing, Oklahoma, which is the delivery point for benchmark West Texas Intermediate crude, rose to 38 million barrels with the overall capacity estimated at 41 million barrels.
July Brent Crude declined to US$71.02/barrel, while US light, sweet crude for July delivery slipped below US$70/barrel, settling at US$69.55/barrel on the New York Mercantile Exchange (NYMEX).
Blue chip oil and gas producers were in decline today. BP (LSE: BP) lost 4%, while fellow supermajor Shell (LSE: RDSB) shed 2%, as did BG Group (LSE: BG) and Tullow Oil (LSE: TLW). Another FTSE 100 constituent Cairn Energy (LSE: CNE) lost 1.7%.
Engineering firms Amec (LSE: AMEC) and Petrofac (LSE: PFC) followed with each sliding 1.5%.
Midcaps fell with the exception of JKX Oil & Gas LSE: JKX), which posted a small gain and Melrose Resources (LSE: MRS), which was flat.
Premier Oil (LSE: PMO), Salamander Energy (LSE: SMDR) and Heritage Oil (LSE: HOIL) were at the bottom of the pile with losses of 4%. Dana Petroleum (LSE: DNX) declined 1.5%, while Dragon Oil (LSE: DGO) and Soco International (LSE: SIA) lost 1.2% and 1% respectively.
Services companies heade din different directions as while Wood Group (LSE: WG) declined 1.8%, Wellstream Holdings (LSE: WSM) posted a small gain.
Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) was one of the top performing juniors with a 7% gain. Iraq operating Irish oil company Petrel Resources (AIM: PET) slipped 7%.