Crude Oil Drops On Ideas Rally Overdone

Crude oil is lower this morning, with July retreating from last night's close of $62.04/barrel, the highest since November, on ideas that the recent rally to multi-month highs has been overdone.

Prices rallied yesterday after US Energy Dept data showed crude oil stocks fell by 2.11 million barrels last week, a second week of substantial declines. Meanwhile gasoline inventories plunged by 4.34 million barrels. Both figures were substantially larger falls than had been expected.

Traders noted however that the drop in supplies had more to do with decreased production than increases in demand. US refineries operated at 81.8% of capacity, down 1.9% from the previous week. Additionally, US fuel demand fell 7.6% in the four weeks ended May 15.

At 9am London time July WTI crude was down 46 cents at $61.58/barrel.