Oil futures fall after 10% surge; supply data ahead

Crude-oil futures fell Wednesday morning, giving up some ground after soaring more than 10% in the previous session.

With at least one market uncertainty out of the way following the U.S. presidential election, traders moved their attention to the latest data on U.S. petroleum supplies due shortly.

Crude for December delivery fell $2.07 to $68.46 a barrel in electronic trading on Globex.

"Crude prices were lower amid profit-taking following a sharp rally yesterday and as the dollar appreciated after Barack Obama's victory in the U.S. presidential elections," wrote analysts at Sucden Research in a report.

On Tuesday, commodities rallied across the board, with December oil surging $6.62, or 10.4%, to close at $70.53 a barrel on the New York Mercantile Exchange.

In a historic election Tuesday, Sen. Obama of Illinois rode massive voter turnout to a sweeping victory over Sen. John McCain, becoming the first African-American elected as the nation's chief executive.

There's "not much else going on except analyzing the election," said Charles Perry, president of energy-consulting firm Perry Management.

"But as time moves on, Obama was not in favor of off shore and ANWR [Arctic National Wildlife Refuge] drilling, which will leave traders worrying about less supply in the long run," he said.

Phil Flynn, a vice president at Alaron Trading, pointed out in a note to clients that President Obama has said that within 10 years, he will save more oil than we currently import from the Middle East and Venezuela. "He will start to do that, he says, by putting 1 million electric cars on the road -- most of which he envisions being built in America," said Flynn.

That's "assuming of course that our car companies make it and that we may actually start buying cars again, which looks today to be kind of a novel concept," he said.

"But that is all long term. Today, the reality is the global economy is still struggling," Flynn said.

Supply data ahead

Energy traders also looked ahead to Wednesday's data on U.S. petroleum supplies from the Energy Information Administration, which will cover the week ended Oct. 31. The data are due at 10:35 a.m. EDT.

Analysts at MF Global expect the data to show that crude supplies climbed by 2.1 million barrels last week. They are also looking for a rise of 800,000 barrels in distillate inventories and a 1.5 million-barrel decline in motor gasoline stocks.

On average, industry analysts polled by Platts expect to see a climb of 500,000 barrels in crude supplies, a rise of 1.4 million barrels in distillate stocks, and a decline of 1.1 million for motor gasoline supplies.

On Globex Wednesday, December reformulated gasoline fell 2.6 cents to $1.5065 a gallon and December heating oil dropped 6.6 cents to $2.0954 a gallon.

Dollar impact

On Tuesday, oil prices rallied as the U.S. dollar "got crushed in anticipation of what would turn out to be a Presidential elect Obama blowout," said Flynn. "You could assume it was a euphoric reaction to a stock market rally or perhaps the fear that an Obama presidency will mean a return to massive government spending and huge inflation."

Overall, "the market continues to try to figure out what this change actually means," he said.

On Wednesday, the U.S. dollar was higher against most major counterparts. The dollar index a measure of the greenback against a trade-weighted basket of six currencies, stood at 84.794, up from 84.533 in North American trade late Tuesday.

The [oil] market is still dealing with the long-term effects of world financial problems and lower demand," said Darin Newsom, a senior analyst at DTN.

"Tuesday's rally still looks like nothing more than non-commercial short-covering," he said. "While the market could post a short-term rally, I'm not looking for a major change in trend until supply and demand begin to change."

Elsewhere in the energy market, natural-gas prices lost ground. December natural gas futures shed 6.1 cents to $7.157 per million British thermal units.

The EIA will report its weekly data Thursday on natural-gas supplies in storage, covering the week ended Oct. 31.

Analysts at IHS Global Insight expect the report to show a climb of 50 billion cubic feet.

Other commodities such as gold and copper also headed lower Wednesday.

Source: MarketWatch