Crude Oil Falls to 5-Month Low as Natural Gas Inventories Surge

Crude oil fell to the lowest in more than five months, following natural gas, after an Energy Department report showed that U.S. inventories of the competing fuel jumped.

Gas stockpiles rose 108 billion cubic feet, reaching 3.084 trillion cubic feet last week, the report showed. An increase of 92 billion was expected, according to the median of responses from a Bloomberg News survey of 25 analysts. Some manufacturers and utilities can switch between oil-based fuels and natural gas depending on costs.

“We were struggling to rise earlier because inventories are very high across the board, then we got the bigger-than-expected natural gas storage numbers,” said Tom Bentz, an oil broker with BNP Paribas Commodity Futures Inc. in New York. “Heating oil is retreating as well, which is putting further pressure on all energy contracts.”

Crude oil for October delivery declined 75 cents, or 1.2 percent, to $63.22 a barrel on the New York Mercantile Exchange, the lowest close since March 22. Prices are down 2.9 percent from a year ago.

Natural gas for October delivery fell 55.7 cents, or 10 percent, to $4.892 per million British thermal units in New York, the lowest close Sept. 16, 2004. Prices are down 56 percent from a year ago.

Crude-oil supplies dropped 2.9 million barrels to 327.7 million, leaving inventories 11.7 percent higher than the five- year average, the Energy Department reported yesterday.

Fuel Stockpiles

Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 4.6 million barrels to 144.5 million last week, the report showed. The gain left inventories 11.9 percent higher than the five-year average.

Heating oil for October delivery slipped 3.18 cents, or 1.8 percent, to $1.711 a gallon, the lowest close since March 10.

The profit from making three barrels of crude oil into two barrels of gasoline and one of heating oil is $4.196, based on futures prices in New York, down from $10.41 on Aug. 14.

“The petroleum product markets are weighing on crude,” said Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina. “The refinery margins for gasoline and heating oil have collapsed. You are going to see refiners cut back as a result.”

U.S. refineries usually curb crude oil deliveries in September and October when they shut units for maintenance as the end of the vacation season cuts gasoline demand and before winter demand for heating-oil begins.

“This is a time of year when it’s not unusual for there to be price weakness because demand falls,” said Phil Flynn, vice- president at Alaron Trading Corp. in Chicago. “Prices should rise once we approach the heating season and demand picks up.”

Nigerian Strike

Nigeria’s two main oil-worker unions called off a strike a day before it was scheduled to end. More than 20,000 workers from the Petroleum & Natural Gas Senior Staff Association, or Pengassan, and the National Union of Petroleum & Natural Gas Workers, or Nupeng, went on strike yesterday to protest a lack of security. The walkout affected all aspects of the oil industry.

More than 50 oil workers, mostly expatriates, have been abducted this year in Nigeria, Africa’s biggest oil producer. At least 20 were taken in seven incidents in August alone.

Militant attacks and other damage have cut Nigeria’s oil production by 872,000 barrels a day, Oil Minister Edmund Daukoru said on Sept. 11.

Brent crude oil for October settlement fell 75 cents, or 1.2 percent, to $62.24 a barrel on the London-based ICE Futures exchange, the lowest close since March 22.