Thursday June 18, 5:38 pm Eastern Time
Crude Continues Slide After Rally
by The Associated Press
Crude oil futures on Thursday gave up gains made a day earlier on the New York
Mercantile Exchange as investors rushed to dump their positions rather than take
possession next week of ample U.S. supplies because storage space is scarce.
On other markets, cotton futures rallied on hot weather worries.
Crude on Wednesday saw heavy buying in the wake of the American Petroleum
Institute's report that inventories fell an unexpectedly heavy 1.135 million barrels last
week to 344.469 million barrels. Unleaded gasoline inventories also fell, down 41,000
barrels to 217.736 million barrels -- an indication that the crude decline did not come
from the production of gasoline.
But investors taking stock of the situation on Thursday noted inventories around the
country still are sharply higher than a year ago and noted that supplies in the important
Cushing, Okla., delivery point remain ample. With the active July contract expiring late
Monday, market participants rushed to shed their holdings rather than take delivery of
physical supplies and with them, the headache of figuring out where to store them.
Futures prices have plunged in the last few months upon a contract's expiration, a
reminder of the ample supplies on hand.
There also is widespread skepticism that oil producers who pledged in March to cut a
total 1.72 million barrels a day from the market actually met that target.
Kuwait, the United Arab Emirates and Oman, members of the Gulf Cooperation Council,
on Tuesday announced a second round of cuts that raised total reductions pledged by
members of the Organization of Petroleum Exporting Countries and other producers to
about 800,000 barrels a day. Analysts have said exporters must cut another 1.5 million
barrels a day from the market to overcome weak demand from economically depressed
Asia.
Investors say the next important litmus of world oil producers' resolve will come next
week, at OPEC's meeting in Vienna.
Crude for July delivery fell 83 cents to $11.77 a barrel; July heating oil fell .41 cent to
36.91 cents a gallon; July unleaded gasoline fell .67 cent to 45.84 cents a gallon July
natural gas fell 3 cents to $2.144 for each 1,000 cubic feet.
Cotton futures rose nearly 2 percent as hot, dry weather in Texas growing regions
threatened developing crops there. Drought in Texas's Rio Grande region may cost
growers of cotton and grains some $517 million, according to estimates from the state
Agricultural Extension Service.
Poor growing weather has played havoc with crops in Texas and California, threatening
to reduce what already was expected to be one of the smallest crops in years at a time
of rising demand. The U.S. Agriculture Department on Thursday reported in its weekly
export sales data that shipments had risen by 4 percent over the previous week, putting
exporters 90 percent on target for sales of 7.35 million bales at 480 pounds each in the
marketing year ending July 31.
July cotton rose 1.19 cents to 74.50 cents a pound on the New York Cotton Exchange.
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