Oil Declines on Warm U.S. Weather Forecast, Rising Inventoriesadmin
Crude oil tumbled for a second day on forecasts that warm U.S. weather will curb demand from the world’s largest energy consumer and bolster inventories that are already above average.
Higher-than-usual temperatures are expected in most of the U.S. from Nov. 7 until Nov. 13, the National Weather Service reported. U.S. crude inventories, already 12 percent above their five-year average, probably rose 2.7 million barrels last week, according to a Bloomberg News survey of nine analysts. The price of oil dropped the most in more than a year yesterday.
“A colder-than-usual October on the U.S. East Coast is now being forecasted to turn into a warmer-than-normal first half of November,” analysts at Barclays Capital in London, led by Kevin Norrish, wrote today in a report. “That clearly helped sentiment become a bit more bearish.”
Crude oil for December delivery dropped as much as 70 cents, or 1.2 percent, to $57.66 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $57.81 at 2:26 p.m. London time. Yesterday, the contract fell $2.39, or 3.9 percent, to $58.36, the biggest one-day decline since Aug. 17, 2005.
Brent crude oil for December settlement declined 50 cents to $58.18 a barrel on the ICE Futures exchange.
There will be “a rapid warm-up in most areas as mild Pacific air” causes cold air to be “locked up well north of the Canadian border,” the U.S. National Weather Service said yesterday in a report posted on its Web site.
Oil prices have fallen about 26 percent from a record $78.40 a barrel in New York reached on July 14, when fighting between Israel and Hezbollah militants in Lebanon raised the possibility of Middle East supply disruptions. Since then, rising inventories and a calm U.S. hurricane season have caused prices to drop.
The oil price was supported today when OPEC Secretary General Mohammed Barkindo said the group may agree to a further cut in crude production. At the same time, Turkey’s Bosporus Straits, one of the world’s busiest waterways, was closed to large ships headed north because of strong winds, said Emre Tungu, a ship agent at Master Maritime Agencies Inc. in Istanbul.
The Bosporus, which connects the Black Sea and the Mediterranean Sea, shut at 9:30 a.m. Istanbul time to vessels more than 200 meters (656 feet) long. Docking operations at the Sheskharis oil terminal, part of Russia’s largest Black Sea port of Novorossiisk, were also hampered by strong winds, Seatrade Maritime Ltd. wrote in a report.
The Organization of Petroleum Exporting Countries, the supplier of 40 percent of the world’s oil, agreed on Oct. 20 to lower output by 1.2 million barrels a day, starting tomorrow. OPEC will decide at a meeting on Dec. 14 in Abuja, Nigeria, whether to cut production again to try to boost the price of oil.
The group may reduce output in 2007 as demand weakens, Barkindo said today. The 11 members of OPEC expect to produce 28.1 million barrels a day of crude next year, down 5.7 percent, or 1.6 million barrels a day, from last month’s output.
There is a “market oversupply” because countries that aren’t part of OPEC are pumping more oil while demand remains “far from robust,” he said.
The OPEC crude oil basket price fell 66 cents to $54.87 a barrel yesterday, the group said in an e-mail. The daily price index is a weighted average of 11 crude blends produced by OPEC nations.
“There are more and more voices to call another cut in December, and we think this might be possible,” said Tobias Merath, commodity strategist at Credit Suisse in Zurich. “As stockpiles are high, it’s not sure whether a production cut of 1.2 million barrels per day is enough to stabilize the oil price.”
U.S. crude oil stockpiles unexpectedly fell in the week ended Oct. 20 when the Louisiana Offshore Oil Port, the largest U.S. import terminal, shut because of bad weather. The port, which was closed for about 70 hours, caught up on imports in about two days.
U.S. inventories of crude oil, diesel, heating oil and gasoline in the week ended Oct. 20 were higher than the five-year average for the period, the Energy Department said last week.
Supplies of distillate fuel, a category that includes heating oil and diesel, fell 1.4 million barrels last week, according to the median of nine analysts’ responses to a Bloomberg survey. Gasoline stockpiles probably slipped 1 million barrels.
The U.S. Energy Department is scheduled to release its weekly report on petroleum inventories tomorrow at 10:30 a.m. in Washington.
To contact the reporter on this story: Eduard Gismatullin in London at firstname.lastname@example.org