Oil trading below $69 Tuesday as refiners may cut output

Crude oil is currently trading around $69 a barrel on speculation US refiners may cut operating rates after fuel stockpiles reached a 26 year high.

The country’s supplies of distillate fuel, which includes diesel and heating fuel, probably rose for a fourth week from the highest since 1983, according to a Bloomberg News survey before an Energy Department report tomorrow. U.S. crude oil inventories probably fell last week as refineries bought fewer cargoes before idling plants for seasonal maintenance.

“People are looking more at fundamentals, the supply- demand balance,” said Tetsu Emori, a commodity fund manager at Astmax Co. Ltd. in Tokyo. “Crude is still moving between $65 and $75, there’s no momentum at the moment.”

Crude oil for October delivery was at $68.70 a barrel, down 16 cents, at 12:34 p.m. in Singapore in electronic trading on the New York Mercantile Exchange. Yesterday, the contract fell to $68.86, the lowest settlement since Sept. 4. Futures have gained 55 percent this year.

Fuel stockpiles in the world’s biggest energy users including the US and Japan have risen as the global recession sapped demand. Refiners are cutting output to boost processing profit as consumption slows with the end of the peak US driving period last week.

“As soon as the gasoline demand season is over, we should be looking at higher inventories,” Emori said. “That’s quite a bearish factor for the crude oil market.”