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Saturday, November 12, 2005
Crude oil prices shed $1 due to less demand
WASHINGTON - Crude oil futures fell by more than $1 last Thursday, settling below $58 a barrel for the first time since late July in a sell-off fueled by reports of rising supply and falling demand.
The United States Energy Information Administration released data that showed natural gas in storage grew more than expected last week, surpassing a level that many analysts believe is necessary to meet winter demand.
The Paris-based International Energy Agency (IEA) said in a monthly report that global oil demand growth in 2005 would be slightly lower than previously expected.
The reports gave momentum to a price decline already underway due to a moderation in gasoline demand and warmer-than-usual weather in the US Northeast and Midwest.
Demand
“We don’t have any big demand right now. Heating is not upon us yet, cooling is behind us and the summer driving season is behind us,” said James Cordier, president of Liberty Trading Group in Tampa, Florida. “If you’re going to have a soft spot, this is it.”
Cordier said technical charts suggest that oil prices can fall to the mid-$50 range, before finding some support. Moreover, he said the downtrend was likely to be stopped in its tracks by late December, assuming normal winter temperatures.
Light sweet crude for December delivery fell $1.13 to settle at $57.80 a barrel on the New York Mercantile Exchange, the lowest level for the front-month contract since July 21.
In London, Brent crude futures on the ICE Futures exchange fell $1.20 to settle at $55.68 per barrel.
Gasoline slipped by 4.45 cents to settle at $1.5068 a gallon while heating oil fell 4.61 cents to settle at $1.7435 a gallon.
Decline
Nymex natural gas futures declined by 28.9 cents to settle at $11.38 per 1,000 cubic feet.
The drop in the price of natural gas futures followed the release of Energy Department data showing that US storage of natural gas grew last week to 3.2 trillion cubic feet—a level many analysts consider a crucial measure of adequate pre-winter supply.
Higher production
The IEA lowered its forecast for global oil demand growth in 2005 by 70,000 barrels a day to 1.2 million barrels per day. The agency also said production capacity of the Organization of Petroleum Exporting Countries can rise by 1.2 million barrels per day to 33 million barrels per day by the end of next year.
Last Wednesday, the US Federal Energy Information Administration said crude-oil inventories rose 4.5 million barrels to 323.6 million barrels in the week ended Nov. 4 from a week earlier. Crude stocks are about 13 percent higher than they were a year ago.
With energy prices falling despite the continued loss of output of oil, natural gas and gasoline in the aftermath of hurricanes Katrina and Rita, Cordier said it is a clear indication that the market is being driven by a dropoff in demand.
He added that demand should pick up again later in the year, assuming normal winter weather patterns. (AP)
(November 12, 2005 issue)
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