Crude Oil Falls to Six-Week Low

Written by LShopper

Tuesday, 07 July 2009 22:42

Crude oil fell to a six-week low on speculation that a government report will show U.S. fuel supplies gained as the recession cut demand. Gasoline inventories rose 900,000 barrels last week, according to a Bloomberg News survey conducted before tomorrow’s Energy Department report. Oil in New York has dropped 14 percent from an eight-month high of $73.38 reached on June 30 as lower U.S. payrolls raised concern that the economy of the world’s biggest energy-consuming country will be slow to recover. “Market sentiment has changed 180 degrees in one week,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “Any price drop was seen as a time to buy and send the market higher. That all changed after last week’s employment report.” Crude oil for August delivery fell $1.12, or 1.7 percent, to $62.93 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the lowest settlement since May 26. Prices are up 41 percent this year. Prices extended losses in electronic trading after the American Petroleum Institute reported that U.S. gasoline supplies rose 767,000 barrels to 212.4 million and stockpiles of distillate fuel, a category that includes heating oil and diesel, climbed 3.42 million barrels to 158 million, the highest since 1985. Futures were down $1.73, or 2.7 percent, at $62.32 a barrel at 4:53 p.m. Gasoline for August delivery declined 0.76 cent, or 0.4 percent, to end the session at $1.7328 a gallon in New York. It was the lowest settlement since May 15. U.S. employers cut 467,000 jobs in June, according to a Labor Department report on July 2. The jobless rate jumped to 9.5 percent, the highest since 1983, from 9.4 percent. “The price fall looks like a needed correction to the market,” Simon Wardell, energy research manager at Global Insight Inc. in London, said today on Bloomberg radio. “The oil market doesn’t reflect spot conditions, it reflects the expectation of conditions, and those change very quickly.” Supplies of distillate fuel probably rose 1.83 million barrels last week, according to the median of responses from 16 analysts surveyed by Bloomberg News. Crude-oil stockpiles fell 2.8 million barrels, the survey showed. The Energy Department is scheduled to release its Weekly Petroleum Status Report tomorrow at 10:30 a.m. in Washington. The industry-funded API released its weekly supply data at 4:39 p.m. today, nine minutes later than usual. Total daily fuel demand in the U.S. averaged over the four weeks ended June 26 was down 5.8 percent from a year earlier, the department said last week. “It’s hard to be bullish right now,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “The driving season is almost over as far as refiners are concerned and the economy has yet to recover.” Brent crude for August settlement declined 82 cents, or 1.3 percent, to end the session at $63.23 a barrel on London’s ICE Futures Europe exchange. It was the lowest settlement price since May 27. Declining energy prices helped send the Reuters/Jefferies CRB Index of 19 raw materials lower. The index dropped 1.3 percent to 237.08, the lowest level since May 15. The dollar rose versus the euro, curbing the appeal of commodities to investors looking for an inflation hedge. The U.S. currency advanced 0.5 percent to $1.3913 per euro from $1.3984 yesterday. The U.S. raised its forecast for crude-oil prices this year by 2.8 percent in a report today. West Texas Intermediate crude oil, the U.S. benchmark, will average $60.35 a barrel in 2009, up from last month’s forecast of $58.70, the Energy Department said in its monthly Short-Term Energy Outlook. “Volatility is not going to go away, which makes it very tough to forecast what prices are going to do,” said Tancred Lidderdale, a government economist in Washington who supervised the monthly outlook. “Uncertainty about the economy is creating these volatile conditions.” The world produced 85.5 million barrels of crude oil a day in 2008, according to the department’s outlook. Output is forecast to drop 2.2 percent to 83.65 million this year. “We’ll be flat at 85 million barrels,” T. Boone Pickens, the founder and chairman of Dallas-based BP Capital LLC, said today in an interview. “By 2013 we’re going to see a decline in production. In 10 years we’ll be at $300 a barrel.” Pickens, 81, one year ago started a $60 million promotion for a national energy plan that relies on domestically produced natural gas to cut U.S. dependence on foreign oil. The Organization of Petroleum Exporting Countries will publish its annual oil market outlook and yearly energy statistics tomorrow and the Paris-based International Energy Agency will issue its monthly report on world oil demand and supply on July 10. Crude oil volume in electronic trading on the Nymex was 412,978 contracts as of 3:25 p.m. in New York. Volume totaled 493,845 contracts yesterday, 1.2 percent lower than the average over the past three months. Open interest was 1.15 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

Last Updated on Tuesday, 07 July 2009 23:05