Crude futures diverged late in the US trading day Wednesday, as the front-month ICE Brent contract slid from a session high of $104.07/b to a low of $102.85/b in a little over 40 minutes.
ICE July Brent settled 20 cents lower at $103.04/b, after shedding more than 70 cents in the last 30 minutes of trading, even as NYMEX July crude largely retained earlier gains, to settle 43 cents higher at $93.74/b.
"The volumes were rather low going into the close," Oil Outlooks President Carl Larry said. "It looked like a bit of profit-taking going into the close, a thought that they might as well take profits here if the Asian and European markets come in lower [Thursday]. Brent, which is more closely tied [to those markets] would also come in lower."
Equity markets fell sharply across of much of Asia and Europe overnight, with bearish sentiment carrying over into the US trading day. At the 2:30 p.m. EDT (1830 GMT) market settle, the Dow Jones Industrial Average was down 1.42% at 14,961.7, while the Standard & Poor's 500 had shed 1.43% to 1,608.07.
This is the first time the Dow has dropped below the 15,000 mark since May 7.
By contrast, NYMEX July crude proved more resilient to the late-day weakness, retaining some of its gains accrued late in US morning trading in the wake of the publication of the US Energy Information Administration's inventory report for the week that ended Friday.
The front-month contract peaked at a one-week high of $94.48/b shortly after the 10:30 a.m. EDT (1430 GMT) release, after the EIA's data showed an unexpectedly large 6.267 million barrel decline in US crude inventories, in addition to a draw at the Cushing, Oklahoma, storage hub, the delivery-point for the NYMEX crude contract.
However, Wednesday's decline in crude oil stocks fell below the American Petroleum Institute's report late on Tuesday of a 7.8 million barrel draw, and the front-month contract drifted lower for much of the afternoon session.
"If the market really believed a similar number would be reported by the [Department of Energy's EIA unit] today we should have seen a larger price increase than what we saw before the DOE stats were released," analysts from DNB Markets said in a note.
"Hence the large reported crude stock draw from the DOE of 6.3 million barrels was not at all as bullish as it would have been if the API had not already cemented a bullish expectation," they added.
Products markets also pulled back late in the session as the Brent complex fell, though NYMEX July RBOB closed above Tuesday's settle, ending the day up 48 points at $2.8230/gal.
The front-month contract peaked at $2.8570/gal in the afternoon session, its highest level since May 28, after the EIA's data showed a relatively large 1.826 million barrel drop in East Coast gasoline inventories, home of the New York Harbor-delivered NYMEX RBOB contract.
In contrast, NYMEX July ULSD settled down 95 points at $2.8554/gal, after pulling back from a high of $2.8924/gal, while ICE June gasoil was up $5/mt at $862.75/mt at 2:30 p.m. EDT. Wednesday's EIA data reported a 2.611 million barrel build in US distillate inventories.
The ADP Nonfarm Employment change report for May fell short of market expectations, showing an increase of 135,000 private sector jobs in the US in May, adding weight to equities sentiment. The report is often seen as a barometer for the Department of Labor's report, which is scheduled to be released on Friday.
"This week's employment reports will provide guidance for the timing of the tapering," Again Capital's John Kilduff said in a note. "The market reaction will turn on whether or not good news is bad news and vice-versa. The Fed has long said that employment is a key to their exit strategy."
Shifts in rhetoric from the world's central banks -- particularly the US Federal Reserve -- about the future of monetary easing programs have prompted sharp, volatile shifts in equity, commodity and currency markets in recent weeks.
The US Dollar Index was down 0.22% at 82.591 at 2:30 p.m. EDT, after the dollar weakened against a basket of global currencies overnight, including the euro, the Swiss franc, the UK pound and the yen, which dropped back below the 100 mark against the dollar Wednesday.
