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Associated Press: Oil falls below US$67 on weak demand

Sunday, Sep 10, 2006

Oil prices fell by more than US$1 a barrel on Friday, dipping below US$67 as traders focused on slackening demand and rising supplies.

Crude futures have pulled back more than 15 percent from their all-time high in mid-July to levels not seen since early April. The Atlantic hurricane season so far has been tame and there is growing skepticism that the diplomatic standoff between the West and Iran will prompt OPEC’s No. 2 producer to pull supply off the market.

“The sentiment of the market is to sell,” said Mike Guido, director of commodity strategy at Societe Generale in New York.

Gasoline demand traditionally slips after Labor Day and it will be a month or more before demand for heating oil and other winter fuels picks up in many parts of the country.

Supply worries eased on Thursday after government data showed rising inventories of gasoline and distillate, which includes heating oil. The possibility that BP PLC could restore 180,000 barrels per day of lost Alaskan production at Prudhoe Bay by the end of next month also eased supply fears. The market also anticipates the resumption of some oil production that was shut in Nigeria following militant attacks.

The Organization of Petroleum Exporting Countries meets next week, but analysts do not expect the cartel to alter its official output quota of 28 million barrels per day. If the cartel trims production in an attempt to prop up prices, analysts say the strategy could backfire because it would signal to a market that has worried for several years about tight supplies that the world finally has oil to spare.

Light sweet crude for delivery next month on the New York Mercantile Exchange declined by US$1.07 to settle at US$66.25 a barrel — the lowest closing price since finishing at US$66.23 on April 6.

Brent crude fell US$1.20 to settle at US$65.33 a barrel on London’s ICE futures exchange.

Gasoline futures fell by more than US$0.03 to US$1.6098 a gallon. Heating oil fell more than US$0.04 to settle at US$1.8432 a gallon. Natural gas fell more than US$0.04 to settle at US$5.675 per 1,000 cubic feet.

October Brent crude on the ICE Futures Exchange was down US$0.30 at US$66.23 a barrel.

US crude inventories fell 2.2 million barrels last week to 330.6 million barrels, according to the US Department of Energy. However, inventories remain 6.2 percent above year-ago levels and rising productivity by refiners has pushed up supplies of motor- and home-heating fuels.

Gasoline inventories rose by 700,000 barrels to 206.9 million barrels, which is 6.6 percent above year-ago levels. Distillate fuel inventories rose by 3.1 million barrels to 139.9 million barrels — a bigger build than most analysts expected. They are now slightly above were they were a year ago.

BP officials testified to US lawmakers on Thursday about the company’s operational lapses in Alaska — a big oil spill in March and then the partial shutdown of the country’s largest oil field last month. BP is currently pumping 220,000 barrels a day and Steve Marshall, the president of BP Exploration Alaska Inc, said output could be restored to 400,000 barrels per day as early as the end of next month.

Separately, Royal Dutch Shell PLC said on Thursday that it was putting 180,000 barrels of crude per day back on line in Nigeria, according to Dow Jones Newswires. Shell had taken the oil supply off line July 20 following a construction accident that damaged a key pipeline. Nigeria, Africa’s largest oil producer, has cut about a fifth of its usual production because of militant attacks. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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