Crude Oil Futures Drop to $62.80 a Barrel

SINGAPORE – Crude oil futures dropped further Thursday, extending declines from U.S. trading hours, amid fading concerns about gasoline shortages with the end of the U.S. summer driving season in sight. Traders said prices also fell on selling by speculators after the market’s recent record-setting rally.

Midmorning in Singapore, the front month September contract for light, sweet crude fell as low as $62.80 a barrel on the New York Mercantile Exchange in Asian electronic trading before recovering to $63.20.

On Wednesday, the contract plunged $2.83 to settle at $63.25.

Gasoline lost a cent to $1.8810 a gallon while heating oil inched down a tad to $1.7800.

Prices fell more than 4 percent overnight, surprising many industry watchers because Wednesday’s U.S. petroleum supply weekly report showed a large decline in gasoline inventories – which would normally boost prices.

The U.S. Department of Energy said the nation’s supply of gasoline fell by 5 million barrels in the week ending Aug. 12, putting inventories at 198.1 million barrels, or 12 percent below last year. Crude oil inventories grew by 300,000 barrels last week to 321.1 million barrels, or 11 percent above year-ago levels.

The data is a yardstick for determining demand and usage levels from the world’s largest energy consumer.

Analysts attributed much of Wednesday’s decline to heavy selling by hedge funds and other speculators, leading to a technical correction in a market widely seen as overbought.

But earlier concerns about insufficient gasoline supplies, compounded by a spate of U.S. refinery breakdowns, were easing as more refineries resumed operations and no new outages were reported this week.

Oil prices rose nearly US$10 a barrel over the three weeks that ended Friday, sending crude oil prices up 40 percent compared to a year ago – but still below the inflation-adjusted high of US$90 a barrel set in 1980.

"The concerns about inadequate gasoline and products supply were alleviated because we’ve not heard any reports of refinery breakdowns, and more units have resumed work," said energy analyst Victor Shum of Texas-headquartered Purvin & Gertz in Singapore.

The end of the summer driving season also contributed to helped put traders at ease, Shum said. Summer holidays in the U.S., the biggest oil consumer, end on Sept. 5, Labor Day.

High demand, primarily from China and the United States, has been blamed for limited excess capacity globally, which analysts say leave little wriggle room in the event of a prolonged outage.

But the American Petroleum Institute reported Wednesday that U.S. oil demand fell 3 percent in July compared to the same month last year, while gasoline deliveries fell 0.8 percent, an indication of slowing demand.

Meanwhile, Ecuador’s government Thursday declared a state of emergency in two Amazon provinces to quell protesters who have severely disrupted oil production to press for greater spending on infrastructure and social programs.

Officials at state-run oil company Petroecuador said crude production had fallen 90 percent, from 202,500 barrels to 20,000 barrels, creating losses of around $12 million in revenue between Monday and Wednesday.