Oil falls on demand worries
Reuters
First Posted 04:07:00 09/25/2008
Filed Under: Oil & Gas - Downstream activities, Markets & Exchanges
NEW YORK — Oil prices dropped on Wednesday as concerns on the US economy and sliding fuel demand outweighed hurricane-related supply disruptions that pushed US gasoline stockpiles to their lowest level since 1967.
US crude fell 88 cents to settle at $105.73 per barrel, and London Brent crude LCOc1> fell 63 cents to $102.45 a barrel.
The losses came after a US government report showed nationwide oil demand over the past four weeks running 5.3 percent below last year in the midst of mounting economic turmoil in the world's largest fuel consumer.
Doubts over a sweeping $700 billion plan to rescue the US economy from a deepening housing crisis pushed down global markets, including commodities.
"Crude prices are down as people are taking profits, waiting for what will happen next in the bid to enact a $700-billion bailout package for distressed banks," said Mark Waggoner, president of Excel Futures in Huntington Beach, California.
The losses came despite data from the US Energy Information Administration showing declines in nationwide crude oil and refined products supplies in the wake of Hurricane Ike, which hobbled US energy operations.
US refinery utilization fell to the lowest level on record in the week through Sept. 19, according to US government data, reflecting shut-ins along the Gulf of Mexico caused by Hurricane Ike this month.
Crude stocks dropped by 1.5 million barrels, less than analyst expectations of a fall of two million barrels, while gasoline stocks fell by 5.9 million barrels, compared with analyst forecasts for a drop of 4.0 million barrels.
Distillate stocks were down 4.2 million barrels, compared with forecasts of a drop of 1.5 million barrels.
"The impact of Hurricane Ike was in full force in this week's EIA data as supplies across the board dropped rather sharply, a trend that should continue over the coming weeks sending gasoline stocks to dangerously low levels," said Chris Jarvis, senior analyst for Caprock Risk Management.
US gasoline inventories have dropped to their lowest level since 1967, the EIA said Wednesday.
Energy firms continued efforts to restart production at refineries and pipelines after Ike battered US oil infrastructure in the biggest hit to the US energy supplies since the 2005 hurricane season.
Prices drew some support from a report by Petrologistics that OPEC oil supply fell by 800,000 barrels per day (bpd) in September because of reduced output of members, including Saudi Arabia and Iran.
The estimate suggested OPEC was starting to cut back supplies to levels seen in July even before it agreed on Sept. 10 to trim output to official targets to prop up prices.
"I think the Petrologistic numbers had an impact," said Olivier Jakob, analyst for Petromatrix.
Oil prices have dropped from a record peak above $147 a barrel in July as high fuel prices and mounting economic problems began to curb demand in the United States and other top consumers.
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