tigerhonaker
10-30-2006, 09:46 PM
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Oil Prices
Fall Below
$59 a Barrel
By GEORGE JAHN 10.30.06, 11:27 AM ET
Oil prices fell by 3 percent Monday, slipping below $59 a barrel as traders looked ahead to U.S. supply data due out Wednesday that is expected to show rising inventories of crude.
Doubts about OPEC's ability to implement a 1.2 million barrels a day production cut also weighed on prices.
Last week, oil prices surged after Energy Department data showed a large decline in U.S. crude-oil inventories. But some analysts believe the market overreacted to the data by failing to account for the impact of a temporary shutdown of the Louisiana Offshore Oil Port, through which 10 percent of all U.S. oil imports flow.
"Everybody expects a correction this week," said Antoine Halff, an analyst at Fimat USA in New York who warned of the market's misinterpretation of the data in a report last week.
Light sweet crude for December delivery fell $1.99 to $58.76 a barrel on the New York Mercantile Exchange, where gasoline futures tumbled by almost 7 cents to $1.49 a gallon. In London, Brent crude fell by $2.01 to $59.07 on the ICE Futures exchange.
Oil traders are watching to see how quickly the 11 members of the Organization of Petroleum Exporting Countries move to cut production after announcing that as a group they would reduce output by 1.2 million barrels day.
"Saudi Arabia, the United Arab Emirates and Iran have told some of their customers that they will cut production in coming months," said Victor Shum, an energy analyst at Purvin & Gertz in Singapore. But this hasn't had much impact on prices "because the market already priced in some output cuts from OPEC," he said.
In its daily energy report, Vienna's PVM Oil Associates suggested that the market may not be convinced all the production cuts would be enacted, noting that "data for October ... reportedly showed that OPEC output in fact increased slightly to 30.18 million barrels per day from September levels."
Peter Lengyel of PVM speculated that the downward trend could be nothing more than a correction after "a relatively sharp increase of almost 7 percent" last week.
Prices rose Friday after a British navy official said that a threat from al-Qaida last month targeting Gulf oil terminals resulted in stepped-up security and vigilance at Saudi Arabia's Ras Tanura terminal, as well as a refinery in Bahrain.
"There has been no disruption in oil flows" from the region related to the report, said Shum. "It reminds the market that geopolitics haven't completely disappeared from the scene."
Significant cuts, along with the arrival of winter weather to the Western hemisphere, could raise the floor under the market, however, with demand for heating oil and natural gas leading the way.
"What is going to affect pricing in the coming weeks will really depend on how cold it gets in the Northern Hemisphere winter and the broader global economic outlook," said Shum. "Weather again will be the wild card."
In other Nymex trading, heating oil futures fell by more than 3 cents to $1.6598 a gallon, and natural gas futures declined by more than 28 cents to $7.540 per 1,000 cubic feet.
AP Business Writer Brad Foss in Washington contributed to this report.
http://www.forbes.com/business/healthcare/feeds/ap/2006/10/30/ap3130157.html
Oil Prices
Fall Below
$59 a Barrel
By GEORGE JAHN 10.30.06, 11:27 AM ET
Oil prices fell by 3 percent Monday, slipping below $59 a barrel as traders looked ahead to U.S. supply data due out Wednesday that is expected to show rising inventories of crude.
Doubts about OPEC's ability to implement a 1.2 million barrels a day production cut also weighed on prices.
Last week, oil prices surged after Energy Department data showed a large decline in U.S. crude-oil inventories. But some analysts believe the market overreacted to the data by failing to account for the impact of a temporary shutdown of the Louisiana Offshore Oil Port, through which 10 percent of all U.S. oil imports flow.
"Everybody expects a correction this week," said Antoine Halff, an analyst at Fimat USA in New York who warned of the market's misinterpretation of the data in a report last week.
Light sweet crude for December delivery fell $1.99 to $58.76 a barrel on the New York Mercantile Exchange, where gasoline futures tumbled by almost 7 cents to $1.49 a gallon. In London, Brent crude fell by $2.01 to $59.07 on the ICE Futures exchange.
Oil traders are watching to see how quickly the 11 members of the Organization of Petroleum Exporting Countries move to cut production after announcing that as a group they would reduce output by 1.2 million barrels day.
"Saudi Arabia, the United Arab Emirates and Iran have told some of their customers that they will cut production in coming months," said Victor Shum, an energy analyst at Purvin & Gertz in Singapore. But this hasn't had much impact on prices "because the market already priced in some output cuts from OPEC," he said.
In its daily energy report, Vienna's PVM Oil Associates suggested that the market may not be convinced all the production cuts would be enacted, noting that "data for October ... reportedly showed that OPEC output in fact increased slightly to 30.18 million barrels per day from September levels."
Peter Lengyel of PVM speculated that the downward trend could be nothing more than a correction after "a relatively sharp increase of almost 7 percent" last week.
Prices rose Friday after a British navy official said that a threat from al-Qaida last month targeting Gulf oil terminals resulted in stepped-up security and vigilance at Saudi Arabia's Ras Tanura terminal, as well as a refinery in Bahrain.
"There has been no disruption in oil flows" from the region related to the report, said Shum. "It reminds the market that geopolitics haven't completely disappeared from the scene."
Significant cuts, along with the arrival of winter weather to the Western hemisphere, could raise the floor under the market, however, with demand for heating oil and natural gas leading the way.
"What is going to affect pricing in the coming weeks will really depend on how cold it gets in the Northern Hemisphere winter and the broader global economic outlook," said Shum. "Weather again will be the wild card."
In other Nymex trading, heating oil futures fell by more than 3 cents to $1.6598 a gallon, and natural gas futures declined by more than 28 cents to $7.540 per 1,000 cubic feet.
AP Business Writer Brad Foss in Washington contributed to this report.
http://www.forbes.com/business/healthcare/feeds/ap/2006/10/30/ap3130157.html