Oil Prices Fall on Jump in Gas Stocks

By GILLIAN WONG

SINGAPORE – Crude-oil futures fell Thursday on news that U.S. gasoline stocks rose last week and as forecasts predicted that Hurricane Wilma will likely avoid key U.S. oil facilities along the Gulf of Mexico coast.

In northern Iraq, however, insurgents using explosives set fire to a key oil pipeline.

Light, sweet crude for November delivery slipped 19 cents to $62.22 a barrel in electronic trading on the New York Mercantile Exchange, after earlier dropping as low as $61.80. The contract expires Thursday.

Gasoline rose less than half a cent to $1.6800 a gallon while heating oil fell nearly a cent to $1.9036. Natural gas lost 3 cents to $13.520 per 1,000 cubic feet.

Brent crude futures for December rose 13 cents to $58.78 a barrel on London’s International Petroleum Exchange.

Wilma, which weakened slightly to a still-powerful Category 4 hurricane, was centered in the northwestern Caribbean Sea. The U.S. National Hurricane Center warned it could strengthen again into a Category 5 storm, move into the Gulf of Mexico and then swerve east, toward Florida.

But some analysts said it was risky to assume the storm wouldn’t disrupt the ongoing recovery of oil and gas operations in and around Texas and Louisiana, and recalled that some traders had discounted the impact of hurricanes Katrina and Rita too early.

"We remain on storm watch," says Phil Flynn of Alaron Trading Corp. "The $75-a-barrel area for crude oil is still the target. If Wilma takes a turn toward the oil infrastructure we could be there sooner rather than later."

As of Wednesday, about 65 percent of the Gulf’s oil production and about 52 percent of its natural gas production remained blocked following Katrina and Rita, according to the U.S. Minerals Management Service. The U.S. Gulf region provides 30 percent of oil and 21 percent of natural gas produced in the United States.

Weekly petroleum data from the United States provided some relief to prices as it showed an unexpected increase in gasoline inventories.

For the week ended Oct. 14, U.S. gasoline inventories increased by 2.9 million barrels to 195.7 million barrels. Gasoline stocks remain 4 percent lower than a year ago, but the build came as a surprise to analysts, who underestimated the improvement in U.S. refining capacity and the amount of gasoline imports.

U.S. crude inventories rose by 5.6 million barrels from the previous week to 312.0 million barrels. Crude stocks are nearly 12 percent higher than year-ago levels.

U.S. inventories of distillates – which include diesel and heating oil – dropped by 1.9 million barrels to 122.7 million barrels. They are more than 1 percent above year-ago levels, but in the lower half of the average range for this time of year.

Analysts had been expecting crude inventories to rise by only about 1.5 million barrels, and gasoline and distillate inventories to fall.

In northern Iraq, insurgents set fire to the main oil pipeline that links an oil field in Kirkuk to the country’s largest oil refinery in Beiji, 155 miles north of Baghdad, officials said Thursday.

The explosion set fire to the pipeline and several oil valves about 35 miles west of Kirkuk, said firefighter Adil Mohammed.

Iraq has the world’s third-largest known oil reserves, but the industry has been crippled by several wars, sanctions during Saddam Hussein’s rule and the anti-U.S. insurgency. Militant attacks on pipelines and refineries are frequent.