Oil Prices Slip Despite Supply News
By AI LIN PANG
SINGAPORE – Oil prices inched lower Friday in Asia, after rising overnight the first time in four sessions as investors began to question if supplies of crude and products are sufficient for coming winter demand.
Light, sweet crude for November delivery slipped 18 cents to $81.26 a barrel in Asian electronic trading on the New York Mercantile Exchange by early afternoon in Singapore. The contract rose $1.50 to settle at $81.44 a barrel Thursday in New York.
“There’s been some very minor profit-taking today but it’s just part of the volatile trade in oil markets,” said Victor Shum, a Singapore-based energy analyst with Purvin & Gertz. “The crude oil market remains fundamentally tight in the fourth quarter and prices should hold steady above the $80 mark.”
“Participants view it as a buying opportunity when prices fall to $79 so that should be a rather strong support,” he said.
The U.S. Energy Department reported Wednesday that crude inventories rose by 1.2 million barrels last week, while supplies of distillates, which include heating oil, fell by 1.2 million barrels. Traders say the increase in crude supplies is inadequate, especially as winter approaches.
At the end of the third quarter, many U.S. refineries shut down for maintenance and regear their operations to turn out more home heating oil for the winter. The refineries could start returning to production as early as this month and that ramp-up would increase demand for crude oil.
Analysts add that the lingering threat of hurricanes and a weak dollar also continue to support high oil prices.
Oil and other commodities denominated in dollars are actually falling in price in the eyes of foreign investors, because the greenback has been sliding against other currencies following the Federal Reserve’s recent interest rate cut and some expectations that another rate cut is coming.
Traders shrugged off two reports Thursday that suggest the U.S. economy may be slowing. The Labor Department said applications for unemployment benefits jumped by 16,000 last week, the biggest increase since May and above analyst expectations. The Commerce Department said factory orders dropped by 3.3 percent last month, worse than the 2.8 percent decline analysts forecast.
Energy investors usually worry that a slowdown in the economy could mean demand for petroleum products will fall. The fact that traders ignored the reports reinforces many analysts’ view that supplies are tight enough to support high energy prices.
November Brent crude fell 28 cents to $78.69 a barrel on the ICE futures exchange in London.
Nymex heating oil futures lost 0.28 cent to $2.2285 a gallon while gasoline prices rose 0.14 cent to $2.0536 a gallon. Natural gas futures fell 3.1 cents to $7.381 per 1,000 cubic feet.