Oil Futures Trade Below $57 Per Barrel

By GEORGE JAHN

VIENNA, Austria – Oil traded below $57 a barrel Wednesday after slipping to a four-month low in the previous session on expectations of growing U.S. oil inventories.

Analysts said that continued warm weather and a move into other markets by investors also was depressing prices.

But an OPEC report suggested demand would soon increase, possibly driving prices upward.

In its monthly oil report, the Organization of Petroleum Exporting Countries said the world’s appetite for crude would grow next year to 84.8 million barrels a day – a slight increase over previous forecasts.

It attributed the trend to resurgent Chinese demand and continued economic growth of key economies.

Light, sweet crude for December delivery was down 19 cents to $56.79 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange, as traders awaited the release of U.S. petroleum inventory data later in the day.

The crude contract fell 71 cents to close at $56.98 a barrel Tuesday – the lowest settlement price since June 30, when front-month crude closed at $56.50.

In London, December Brent crude slipped 23 cents to $54.95 a barrel on the ICE Futures exchange.

Traders are optimistic about Wednesday’s U.S. petroleum inventory report. Commercial crude inventories are expected to rise 1.3 million barrels, according to the average estimates of 10 energy analysts surveyed Monday by Dow Jones Newswires. Distillate stocks, which include heating oil and diesel fuel, are expected to increase by 300,000 barrels, while gasoline stocks are expected to rise 1.35 million barrels, according to the survey.

Crude futures were also dragged down Tuesday by unseasonably warm weather in New York that prompted a sell-off in refined products, analysts said.

“Today’s U.S. inventory data release is expected to show bearish figures again,” Vienna’s PVM Oil Associates said in its daily energy market report. “Furthermore, temperatures remain warmer than normal, with the National Weather Service expecting this week’s U.S. heating oil demand to be 6.1 percent below seasonable levels.”

Other analysts said some investors were shifting part of their money from the oil futures market to nonferrous metals futures, as oil prices were now almost 20 percent below the late August intraday peak of $70.85 a barrel.

“By the year-end, front-month Nymex crude may slide to as low as $55 a barrel,” said Ken Hasegawa of Tokyo-based brokerage Himawari CX.

Heating oil and gasoline rose marginally to $1.6831 a gallon and $1.4605 a gallon, respectively. Natural gas rose 4.7 cents to $11.610 per 1,000 cubic feet.

Still, Phil Flynn of Alaron Trading Corp. suggested prices could soon rise, once temperatures drop.

“The debate is how cold will it get and for how long,” Flynn said in a research note.

Forecasters are predicting much lower temperatures in the U.S. Northeast – and thus higher demand for heating oil – in the coming week.

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Associated Press Writer Gillian Wong in Singapore contributed to this report.