Oil Prices Tumble to Two-Month Lows
By MADLEN READ
NEW YORK – Crude oil futures sagged more than $1 to two-month lows Thursday as traders exited what they see as a market trending lower, after signs of weakening U.S. gasoline demand due to high pump prices.
Gasoline, heating oil and natural gas prices fell as well. But analysts suggested that the coming Western hemisphere winter could push product prices upward again, with demand for heating oil outstripping supply because of refinery shortfalls and tight imports.
Light, sweet crude for November delivery on the New York Mercantile Exchange fell $1.29 to $61.50 a barrel in midday trading. The contract slid $1.11 on Wednesday to settle at the lowest level since Aug. 5.
"We’ve broken the back a little in the oil market," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. Many traders took profits Thursday on expectations that crude prices will fall into the 50s next week, he said.
November Brent futures at London’s International Petroleum Exchange fell $1.58 to $58.54 a barrel.
Heating oil futures fell nearly 7 cents to $1.945 a gallon, while gasoline futures dipped nearly 8 cents to $1.83.
However, prices at the pump still hover around $3 a gallon. On Thursday, the average U.S. price of a gallon of unleaded gas was $2.94 – a dollar more than a year ago.
Natural gas fell about 41 cents to $13.77 per 1,000 cubic feet on Thursday, after the U.S. Department of Energy’s Energy Information Administration said natural gas inventories rose 44 billion cubic feet in the week ending Sept. 30.
However, natural gas inventories are still nearly 5 percent below year-ago levels, and prices could surge again if another storm approaches the Gulf or demand rebounds.
"We may not have seen the high in natural gas," Silliere said. "But it looks like we’ve seen the high in crude for some time."
The Energy Department said Wednesday that fuel consumption in the past month fell by nearly 3 percent compared with last year. Experts said demand was falling due to high pump prices and an economic slowdown in parts of the United States affected by hurricanes Katrina and Rita, such as the Gulf Coast states.
"The September numbers confirm the trend that historically high oil prices are now affecting oil consumption," Energyintel analyst John van Schaik said in a research note.
The sell-off came as traders largely ignored weekly U.S. data that showed widely expected declines in petroleum inventories.
U.S. crude inventories fell, but by just 300,000 barrels to 305.4 million barrels – still a comfortable 11.5 percent higher than a year ago. U.S. commercial distillate stocks, which include heating oil and diesel fuel, plunged 5.6 million barrels to 128 million barrels last week.
The decline in gasoline stocks of 4.3 million barrels to 195.5 million barrels could also have been greater, if not for an on-week jump in imports of nearly 18 percent.
Oil is now 10 percent below the Sept. 1 record close of $69.47, while natural gas futures are roughly double year-ago prices.
Meanwhile, reports of refinery recoveries continued to trickle in.
Chevron Corp. said its Pascagoula, Miss., oil refinery, which can produce up to 325,000 barrels of oil per day, could resume normal operations by the end of this month, slightly ahead of earlier estimates. The refinery had been shut down since Katrina hit and damaged its marine terminal, cooling towers and other vital equipment.
Chevron said Wednesday it has resumed some production at two large offshore platforms in the Gulf of Mexico, shut ahead of Hurricane Rita last month. Royal Dutch Shell PLC also said Wednesday that its 275,000 barrel-a-day Port Arthur refinery should restart within the month.
Recovery of oil and natural gas production has also been slow. As of Wednesday, 87 percent of oil production and 69 percent of natural gas production remained blocked, according to the U.S. Department of the Interior’s Minerals Management Service.
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Associated Press Writers George Jahn in Vienna, Austria, and Gillian Wong in Singapore contributed to this report.