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Oil slips a few pennies; demand looks strong but supplies sufficient

An oil pump works at sunset in the desert oil fields of Sakhir, Bahrain, Jan. 22, 2013. THE CANADIAN PRESS/AP, Hasan Jamali

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An oil pump works at sunset in the desert oil fields of Sakhir, Bahrain, Jan. 22, 2013. THE CANADIAN PRESS/AP, Hasan Jamali

The price of oil slipped a few pennies Tuesday as the outlook for rising demand was offset by expectations of sufficient supplies.

Benchmark West Texas Intermediate crude for July delivery fell six cents to close at US$104.35 on the New York Mercantile Exchange. On Monday, oil gained $1.75 to close at $104.41.

Brent crude, a benchmark for international oils used by many U.S. refineries, fell 47 cents to close at US$109.52 a barrel in London.

Recent economic indicators around the world suggest stronger global growth that could boost demand for crude. Among them: Japan raised its estimate of gross domestic product for the first quarter of this year, hiring in the U.S. appeared solid for the fourth month and China's export growth accelerated in May.

While that has pushed up the price of oil in recent days, the gains seem to have topped out Tuesday. "The various economic releases haven't been consistent enough or sufficiently pronounced to force significant upward adjustment in global demand," wrote energy analyst Jim Ritterbusch in a note to clients Tuesday.

That means supplies are likely ample enough to meet this strong — but not overwhelming — demand. Ritterbusch predicts crude prices will drift lower in the coming days.

That could change, however, if data this week from the U.S. government show oil and gasoline stocks falling more than expected.

Data for the week ended June 6 is expected to show draws of 1.2 million barrels in crude oil stocks and of 500,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Department's weekly petroleum report will be out on Wednesday.

This week's meeting in Vienna of the Organization of Petroleum Exporting Countries is largely expected to keep its output target of 30 million barrels a day unchanged.

"The production of OPEC is currently matching its official quota," said Olivier Jakob of Petromatrix in Zug, Switzerland. "OPEC has no incentive to change anything."

In other energy futures trading on the Nymex, wholesale gasoline fell 1.1 cents to close at US$2.97 a U.S. gallon (3.79 litres), heating oil fell 0.7 of a cent cent to close at US$2.88 a gallon and natural gas fell 11.5 cents to close at $4.53 per 1,000 cubic feet.

(TSX:ECA), (TSX:IMO), (TSX:SU), (TSX:HSE), (NYSE:BP), (NYSE:COP), (NYSE:XOM), (NYSE:CVX), (TSX:CNQ), (TSX:TLM), (TSX:COS), (TSX:CVE)

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