Oil futures plunged by more than $2 a barrel Friday after news that Cyclone Gonu had spared major oil installations in the Gulf of Oman and alleviated supply worries.
Traders also let go of earlier concerns over poor refinery runs.
“It's slip sliding away on a summer afternoon,” said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago. “The bulls are disappointed we didn't settle above $67 yesterday and they're running out of reasons to be long.”
Light, sweet crude for July delivery dropped $2.17 to settle at $64.76 a barrel on the New York Mercantile Exchange after dropping as low as $64.60 in the session.
The contract had jumped above $67 a barrel early Thursday and settled 97 cents higher at $66.93 a barrel following a U.S. government report that showed refinery utilization fell 1.5 percent last week to 89.6 percent of capacity.
Brent crude for July lost $2.40 to settle at $68.60 a barrel on the ICE Futures exchange in London.
After pummeling Oman and Iran's southeastern coast, Cyclone Gonu weakened into a rainstorm late Thursday. It spared the region's oil installations, sending oil prices down.
“It's a little silly in a way. The resumption of exports from Oman is putting pressure on the market, but the market should have anticipated this was going to happen,” said Tim Evans, an energy analyst at Citigroup Global Markets.
The storm didn't reduce oil production from the ground during the week, Evans said, but did delay shipments for three days.
“Especially here in the U.S. where inventories are pretty comfortable, waiting three days isn't a problem,” Evans said.
Gasoline futures also slipped 6.56 cents to finish at $2.1271 a gallon as the fifth inventory increase in a row weighed on prices.
The Energy Information Administration reported this week that gasoline inventories jumped by 3.5 million barrels in the week ended June 1, beating estimates. Analysts polled by Dow Jones Newswires had expected a 1.5 million barrel increase.
On Thursday, the market focused on the decline in refinery utilization, but the markets now are treating it as a temporary problem, Evans said.
Inventories of distillate fuels, which include heating oil and diesel, rose by 1.9 million barrels last week, according to the report. Analysts had forecast distillate stocks to grow by 800,000 barrels.
“Give credit here to imports — both for products and crude — as they come to the rescue of the beleaguered U.S. refinery system week after week, and in so doing, are alleviating market concerns about low utilization rates,” said energy analyst Edward Meir at Man Financial.
The U.S. has experienced an unusually high number of refinery outages this spring.
Reports Thursday of a partial shutdown at a 60,000 barrel-per-day Delek US Holdings Inc. refinery in Tyler, Texas, and that Suncor Energy Inc. will shut part of a 246,000 barrel-per-day facility in Alberta for 50 days for maintenance, were the latest.
In other Nymex trading, heating oil futures lost 7.76 cents to end at $1.8988 a gallon while natural gas prices fell 16.2 cents to $7.663 per 1,000 cubic feet.
