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Oil Prices Drop on OPEC Capacity News

Posted on: Monday, 31 October 2005, 12:00 CST

By GILLIAN WONG

SINGAPORE - Crude-oil prices fell Monday as the Organization of Petroleum Exporting Countries said it has "more than adequate" spare capacity to cover expected global demand this winter.

OPEC's acting Secretary-General Adnan Shihab-Eldin said at a conference in Moscow that the bloc's spare capacity is currently 2 million barrels a day.

Light, sweet crude for December delivery lost 65 cents to $60.57 a barrel in electronic trading on the New York Mercantile Exchange. December Brent futures traded in London fell 74 cents to $58.68 a barrel.

Heating oil fell 3 cents to $1.8140 a gallon, while gasoline lost more than 2 cents to $1.5985. Natural gas declined 43 cents to $12.619 per 1,000 cubic feet.

Crude had risen earlier in the day on concerns that increasing winter heating oil and natural-gas demand during winter in the Northern Hemisphere will put a strain on storm-ravaged facilities in the Gulf of Mexico.

Oil and gas facilities in the U.S. Gulf showed little improvement on Friday, suggesting that recovery from back-to-back hurricanes is going slower than expected. The U.S. Minerals Management Service on Friday said 68 percent of daily oil production and 55 percent of gas production in the Gulf of Mexico remained off-line, slightly lower than Thursday.

Traders remained worried that winter in the U.S. Northeast - the world's largest heating oil market - could be colder than expected, driving prices up as demand for distillate fuels spikes.

"(The) energy complex remains very sensitive to cold weather stories, which suggests that the potentially rising prices remain alive, just under the surface," said Mike Fitzpatrick of brokerage Fimat USA Inc.

Concerns about refining capacity, heightened by the devastation wrought in the United States by hurricanes Katrina and Rita, have kept the price of oil above $60 a barrel.

Ken Hasegawa of Tokyo-based brokerage firm Himawari CX expects crude to trade in the narrow range of $60-$62 a barrel in the days ahead due to a lack of decisive news in the market.

"Weather forecasts and the heating oil demand outlook in the U.S. may be the factors that can offer near-term price direction for crude oil," Hasegawa said.

Shihab-Eldin had said Sunday the cartel is aiming to increase crude-oil production by 5 million barrels a day to around 38 million barrels by 2010, and expand output of liquefied natural gas by 1.5 million barrels.

Source: Associated Press/AP Online

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