Oil ends day lower, gaining 3.6% for month
SAN FRANCISCO (MarketWatch) -- Crude-oil futures fell Tuesday to a more than two-week low as doubts rose about the prospects for more stimulus from central banks in the U.S. and Europe.
Crude for September delivery (CLU2) declined $1.72, or 1.9%, to $88.06 a barrel on the New York Mercantile Exchange. That was oil's lowest settlement since mid-July, but futures managed to hold on to a monthly gain of 3.6%.
Some market participants have grown skeptical that monetary policy officials will act this week, said Michael Lynch, president of Strategic Energy & Economic Research in Massachusetts.
The U.S. Federal Reserve began a two-day policy meeting Tuesday. Read more about Fed meeting.
The European Central Bank and the Bank of England meet Thursday. Read more about the ECB.
Hopes were high that worsening U.S. economic data would boost the likelihood the Fed will launch a third round of quantitative easing, although some had also started to question its efficacy.
"Past rounds have lifted both equity and oil prices," Capital Economics economist Julian Jessop said. "However, a third injection of the same medicine is likely to be less effective, especially when demand for a safe haven from the crisis in Europe is keeping the dollar strong."
A weaker dollar is a positive for oil and other dollar-denominated commodities as it makes them cheaper to holders of other currencies.
Economists said the Fed is likely to make a small move this week such as extending its pledge until mid-2015 to keep interest rates extraordinarily low. The Fed has promised to hold rates low until the end of 2014.
Energy traders were also awaiting weekly U.S. supply data. The American Petroleum Institute delivers its report later Tuesday, followed by the more closely watched Energy Information Administration report on Wednesday.
Analysts polled by Platts forecast a 1.6 million barrel decline in crude-oil stocks for the week ended July 27.
Elsewhere in the energy complex, natural gas for September delivery (NGU12) ended less than 1 cent lower, or 0.2%, to $3.21 per million British thermal units.
The commodity on Monday rose 6.6% to its highest since December on unusually hot weather. The record temperatures across key energy markets have brought natural gas's monthly gains to 14%. That follows June gains of 17%.
"Given that high temperatures are still forecast across wide areas of the U.S., the demand for gas to run air conditioning systems should remain high," analysts at Commerzbank said in a note. "For this reason, U.S. natural gas stocks in the past 16 weeks have risen less sharply than on average over the past five years."
Gasoline and heating oil tracked oil lower, with August gasoline (RBQ2) down 2 cents, or 0.8%, to $2.91 a gallon. Gasoline rose nearly 7% in July.
August heating oil (HOQ2) retreated 4 cents, or 1.3%, to $2.84 a gallon. On the month, heating oil gained more than 5%.
Both contracts expired at the end of trading Tuesday.