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After a brief respite, oil looks to be continuing the fall.
Full stocks. More than adequate capacity. Demand growth is slow. The unrelenting bad news is starting to turn more mixed. Speculators are being wrung out of the market. Looks to me like we could see a sizeable drop in oil prices.
Full stocks. More than adequate capacity. Demand growth is slow. The unrelenting bad news is starting to turn more mixed. Speculators are being wrung out of the market. Looks to me like we could see a sizeable drop in oil prices.
Oil Prices Fall Below $59 a Barrel
By BRAD FOSS
The Associated Press
Tuesday, October 3, 2006; 6:54 PM
WASHINGTON -- Oil prices settled at a seven-month low below $59 a barrel Tuesday as rising global supplies, slack demand and a mild Atlantic hurricane season forced geopolitical worries to the backburner.
Crude-oil futures have fallen by more than $4 in the past two days.
The recent plunge in crude has dragged down the retail price of gasoline in the U.S., which now averages $2.31 a gallon nationwide, according to the Energy Department. Analysts say pump prices could drop by another dime or so in the weeks ahead.
Several analysts said they expect Nymex oil to continue falling in the near-term, perhaps as low as $55.
"For the next three months, there is nothing in the fundamentals that is likely to support (higher) prices except an OPEC production cutback," said Michael Lynch, director of Strategic Energy and Economic Research Inc. of Winchester, Mass.
Yet surprisingly, recent repeated calls by some OPEC members to cut output also may be weighing on crude futures, as it may suggest growing desperation by oil producers to stem a near 25 percent decline in prices in less than two months.
Any meaningful action by the Organization of Petroleum Exporting Countries would have to be taken by Saudi Arabia, the world's largest producer, Lynch said. That said, trimming output could also backfire by signaling to a market worried about tight supplies that the world finally has production capacity to spare, he added.
Indeed, the perception that a supply cushion exists may already be taking hold. Analysts estimate that worldwide surplus production capacity stands at 2.5 million barrels a day, or 3 percent of daily demand.
Societe Generale commodities analyst Mike Guido said that pension, mutual and hedge funds are not out buying energy futures as heavily as they have been in recent years, in part because stock market gains have been improving, but mainly because supply concerns have dissipated.
The Energy Department said last week that U.S. inventories of crude oil stood at 324.8 million barrels, or 5 percent more than last year; inventories of distillate, which includes heating oil, stood at 151.3 million barrels, or 15 percent above year ago levels.
U.S. fuel supplies are "more than ample," he said.
While some OPEC members have attempted to shore up prices by calling for a cutback, or threatening to reduce output on their own, Guido said these moves have not had their intended effect.
"It is telegraphing to the market that they're becoming more desperate," Guido said.
On Friday, Venezuela said it would reduce oil output by 50,000 barrels a day to try to stem the recent fall in crude prices. Nigeria has said it intends to cut oil exports by 100,000 barrels, an amount the state-owned oil company described as a routine seasonal reduction.
Combined, these cuts amount to less than 1 percent of daily global demand.
Moreover, the cartel's largest producer, Saudi Arabia, has given no indication it is imminently seeking additional reductions in output, and that is more telling to the market, analysts said. The Saudis have gradually scaled back their output from a peak of 9.6 million barrels per day in mid-2005, to about 9.1 million barrels a day now, according to Eurasia Group analyst Greg Priddy.
Priddy said in a report that the alleged production cuts by Nigeria and Venezuela lack credibility; he said Saudi Arabia and Kuwait are the OPEC members whose actions are worth watching.
In Nigeria Tuesday, militants who attacked a military convoy escorting oil workers in the restive southern delta region freed nine of the 25 Nigerians taken hostage, officials said, as more violence flared.
Eurwen Thomas, a Royal Dutch Shell PLC spokeswoman, said that nine of the hostages had been released. She had no details on the remaining 16 hostages _ all oil workers _ taken Monday.
With economic growth slowing and oil supplies rising, energy markets have become less jittery about geopolitical tensions, such as the diplomatic standoff between Iran and the West over Tehran's nuclear ambitions. For much of the year, fear about potential sanctions against Iran, and possible retaliatory actions by OPEC's No. 2 supplier, had gripped the market.
But Guido said energy traders have grown weary of betting on "what if" scenarios.
Meanwhile, with a mild Atlantic hurricane season winding down, fears of disruptions to Gulf of Mexico oil and natural gas production have eased, prompting speculative buyers to flee the market, analysts said.
Crude oil for November delivery slid $2.35 to settle at $58.68 a barrel on the New York Mercantile Exchange _ the lowest close since Feb. 16. Oil prices declined by $1.88 on Monday.
In London, Brent crude futures on the ICE Futures exchange fell $1.04 to $59.41 a barrel.
In other Nymex trading, heating oil futures declined by 4.79 cents to settle at $1.65392 a gallon while gasoline futures were down 5.20 cents to settle at $1.4567 a gallon.
Natural gas futures rose by 11.6 cents to settle at $5.759 per 1,000 cubic feet. That is 60 percent below year ago levels. Domestic inventories of natural gas are high due to last year's mild winter.
By BRAD FOSS
The Associated Press
Tuesday, October 3, 2006; 6:54 PM
WASHINGTON -- Oil prices settled at a seven-month low below $59 a barrel Tuesday as rising global supplies, slack demand and a mild Atlantic hurricane season forced geopolitical worries to the backburner.
Crude-oil futures have fallen by more than $4 in the past two days.
The recent plunge in crude has dragged down the retail price of gasoline in the U.S., which now averages $2.31 a gallon nationwide, according to the Energy Department. Analysts say pump prices could drop by another dime or so in the weeks ahead.
Several analysts said they expect Nymex oil to continue falling in the near-term, perhaps as low as $55.
"For the next three months, there is nothing in the fundamentals that is likely to support (higher) prices except an OPEC production cutback," said Michael Lynch, director of Strategic Energy and Economic Research Inc. of Winchester, Mass.
Yet surprisingly, recent repeated calls by some OPEC members to cut output also may be weighing on crude futures, as it may suggest growing desperation by oil producers to stem a near 25 percent decline in prices in less than two months.
Any meaningful action by the Organization of Petroleum Exporting Countries would have to be taken by Saudi Arabia, the world's largest producer, Lynch said. That said, trimming output could also backfire by signaling to a market worried about tight supplies that the world finally has production capacity to spare, he added.
Indeed, the perception that a supply cushion exists may already be taking hold. Analysts estimate that worldwide surplus production capacity stands at 2.5 million barrels a day, or 3 percent of daily demand.
Societe Generale commodities analyst Mike Guido said that pension, mutual and hedge funds are not out buying energy futures as heavily as they have been in recent years, in part because stock market gains have been improving, but mainly because supply concerns have dissipated.
The Energy Department said last week that U.S. inventories of crude oil stood at 324.8 million barrels, or 5 percent more than last year; inventories of distillate, which includes heating oil, stood at 151.3 million barrels, or 15 percent above year ago levels.
U.S. fuel supplies are "more than ample," he said.
While some OPEC members have attempted to shore up prices by calling for a cutback, or threatening to reduce output on their own, Guido said these moves have not had their intended effect.
"It is telegraphing to the market that they're becoming more desperate," Guido said.
On Friday, Venezuela said it would reduce oil output by 50,000 barrels a day to try to stem the recent fall in crude prices. Nigeria has said it intends to cut oil exports by 100,000 barrels, an amount the state-owned oil company described as a routine seasonal reduction.
Combined, these cuts amount to less than 1 percent of daily global demand.
Moreover, the cartel's largest producer, Saudi Arabia, has given no indication it is imminently seeking additional reductions in output, and that is more telling to the market, analysts said. The Saudis have gradually scaled back their output from a peak of 9.6 million barrels per day in mid-2005, to about 9.1 million barrels a day now, according to Eurasia Group analyst Greg Priddy.
Priddy said in a report that the alleged production cuts by Nigeria and Venezuela lack credibility; he said Saudi Arabia and Kuwait are the OPEC members whose actions are worth watching.
In Nigeria Tuesday, militants who attacked a military convoy escorting oil workers in the restive southern delta region freed nine of the 25 Nigerians taken hostage, officials said, as more violence flared.
Eurwen Thomas, a Royal Dutch Shell PLC spokeswoman, said that nine of the hostages had been released. She had no details on the remaining 16 hostages _ all oil workers _ taken Monday.
With economic growth slowing and oil supplies rising, energy markets have become less jittery about geopolitical tensions, such as the diplomatic standoff between Iran and the West over Tehran's nuclear ambitions. For much of the year, fear about potential sanctions against Iran, and possible retaliatory actions by OPEC's No. 2 supplier, had gripped the market.
But Guido said energy traders have grown weary of betting on "what if" scenarios.
Meanwhile, with a mild Atlantic hurricane season winding down, fears of disruptions to Gulf of Mexico oil and natural gas production have eased, prompting speculative buyers to flee the market, analysts said.
Crude oil for November delivery slid $2.35 to settle at $58.68 a barrel on the New York Mercantile Exchange _ the lowest close since Feb. 16. Oil prices declined by $1.88 on Monday.
In London, Brent crude futures on the ICE Futures exchange fell $1.04 to $59.41 a barrel.
In other Nymex trading, heating oil futures declined by 4.79 cents to settle at $1.65392 a gallon while gasoline futures were down 5.20 cents to settle at $1.4567 a gallon.
Natural gas futures rose by 11.6 cents to settle at $5.759 per 1,000 cubic feet. That is 60 percent below year ago levels. Domestic inventories of natural gas are high due to last year's mild winter.
Yeah, I know that doesn't happen.
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