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Oil Prices Fall Further Below $58

Posted on: Friday, 11 November 2005, 03:03 CST

SINGAPORE - Crude oil futures slipped further below $58 a barrel Friday amid reports of rising supply and falling demand.

Light, sweet crude for December delivery fell 9 cents to $57.71 a barrel on the New York Mercantile Exchange in electronic trading in Singapore. On Thursday, the contract fell to $57.80, the lowest level for the front-month contract since July 21.

The U.S. Energy Information Administration released data that showed natural gas in storage grew more than expected last week, surpassing a level that many analysts believe is necessary to meet winter demand.

The Paris-based International Energy Agency said in a monthly report that global oil demand growth in 2005 would be slightly lower than previously expected.

The reports gave momentum to a price decline already underway due to a moderation in gasoline demand and warmer-than-usual weather in the U.S. Northeast and Midwest, key markets for heating oil.

"We don't have any big demand right now. Heating is not upon us yet, cooling is behind us and the summer driving season is behind us," said James Cordier, president of Liberty Trading Group in Tampa, Florida. "If you're going to have a soft spot, this is it."

Cordier said technical charts suggest that oil prices could fall to the mid-$50 range, before finding some support. Moreover, he said the downtrend was likely to be stopped in its tracks by late December, assuming normal winter temperatures.

The drop in the price of natural gas futures followed the release of Energy Department data showing that U.S. storage of natural gas grew last week to 3.2 trillion cubic feet - a level many analysts consider a crucial measure of adequate pre-winter supply.

The IEA lowered its forecast for global oil demand growth in 2005 by 70,000 barrels a day to 1.2 million barrels per day. The agency also said that OPEC's production capacity could rise by 1.2 million barrels per day to 33 million barrels per day by the end of next year.

On Wednesday, the federal Energy Information Administration said crude-oil inventories rose 4.5 million barrels to 323.6 million barrels in the week ended Nov. 4 from a week earlier. Crude stocks are about 13 percent higher than they were a year ago.

With energy prices falling despite the continued loss of output of oil, natural gas and gasoline in the aftermath of hurricanes Katrina and Rita, Cordier said it is a clear indication that the market is being driven by a dropoff in demand.

He added that demand should pick up again later in the year, assuming normal winter weather patterns.

Source: Associated Press/AP Online

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