Oil Rally Stalls as U.S. Equity Market Slide Dents Confidence

April 23 (Bloomberg) -- Crude oil was little changed in new York after the risk of widening bank losses dragged U.S. equities and other commodities lower.

Oil’s two-day climb stalled after lenders including Wells Fargo & Co. said credit markets haven’t recovered yet, pulling the Dow Jones Industrial Average and Standard & Poor’s 500 Index lower in late trading yesterday. U.S. oil stockpiles rose for a seventh week to their highest since September 1990, the Energy Department said yesterday.

“With supply staying very stable and demand shrinking or staying the same, the price of oil is being completely dictated by moves in the equities markets,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “The Dow did trade down over 100 points in the last 30 minutes of trading, putting pressure on oil to come down in price.”

Crude oil for June delivery fell 18 cents, or 0.4 percent, to $48.67 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 9:40 a.m. in Sydney.

The contract rose 30 cents, or 0.6 percent, to settle at $48.85 a barrel after earlier climbing as much as 1.1 percent. Prices are up 9.5 percent so far this year.

The S&P 500 Index ended the day down 0.8 percent at 843.55 after rising as much as 1.4 percent. The Dow Jones Industrial Average, which declined 1 percent to 7,886.57 for the day, having earlier gained 1 percent.

Equities, Inventories

“There are a large number of financial professionals trading oil who are paying more attention to the equity markets and the U.S. dollar, while ignoring the fundamentals of the oil market,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “There is nothing subtle about the numbers” from the Energy Department, he said.

Brent crude oil for June settlement fell 1 cent yesterday to $49.81 a barrel on London’s ICE Futures Europe Exchange.

Total daily fuel demand in the U.S., the world’s largest oil consumer, averaged 18.5 million barrels in the four weeks ended April 17, down 6.5 percent from a year earlier, the department said.

Crude oil stockpiles rose 3.86 million barrels to 370.6 million and gasoline inventories climbed 802,000 barrels to 217.3 million, the Energy Department report yesterday showed.

Refineries operated at 83.4 percent of capacity, up 3.1 percentage points from the prior week and the highest since January, the report showed. It was the biggest increase since the week ended Dec. 5.

Maintenance Ends

“This probably marks the end of seasonal maintenance outages, but it’s still puzzling that refiners would increase runs that much given how weak product demand is,” Evans said.

Global inventories may not show a significant decline before the fourth quarter unless OPEC makes additional production cuts, JPMorgan Chase & Co. said earlier this week.

The Organization of Petroleum Exporting Countries agreed at three meetings last year that the 11 members with quotas would cut output by 4.2 million barrels a day to 24.845 million. The group is next scheduled to meet on May 28 in Vienna.

Iran will press for oil prices near $80 a barrel at next month’s OPEC meeting, Oil Minister Gholamhossein Nozari said yesterday, according to state news agency Fars. The $80 level is necessary to support investment in new oil fields, Nozari said.

“You have to question whether there’s justification for a bullish price outlook.” Eagles said. “We’ve been bearish in 2009 and there’s nothing in the first quarter data that suggests we should be less bearish.”