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Crude Oil Futures Drop Below $58 a Barrel

Posted on: Monday, 28 November 2005, 06:00 CST

By GILLIAN WONG

SINGAPORE - Oil futures fell nearly a dollar, dropping below $58 a barrel, as forecasters predicted warmer weather early this week in the U.S. Northeast, the world's largest heating oil market, easing fears of a spike in fuel demand.

Light, sweet crude for January delivery slipped 86 cents to $57.85 a barrel on the New York Mercantile Exchange in electronic trading late afternoon in Singapore.

In London, January Brent crude rose 29 cents to $55.30 a barrel on the ICE Futures exchange.

"The market's reacting to forecasts that heating oil demand will be 20 percent below normal this week, giving refiners a little breathing room to boost supply ahead of winter," said commodities strategist David Thurtell of Commonwealth Bank of Australia in Sydney.

An AccuWeather.com report said that "after several days of bitterly cold conditions, the weather will make a dramatic switch to milder weather" Monday along the East Coast.

Oil prices also dipped on last week's reports of healthy supplies of crude and distillate stocks which include heating oil, diesel and jet fuel, analysts said.

The crude contract lost 13 cents to settle at $58.71 a barrel last Wednesday on a weekly Department of Energy report showing domestic crude oil inventories had grown. U.S. markets were closed the rest of the week for Thanksgiving.

Crude oil reserves expanded 0.1 percent from the week before, standing at 321.8 million barrels. Those inventories are well above the upper end of the average range for this time of year, the report said.

Distillate production overall was 0.2 percent higher last week, matching the rise in demand over the past four weeks, while heating oil stockpiles grew 2.4 percent.

Nymex heating oil Monday fell 2.92 cents to $1.6600 a gallon (3.8 liters) while gasoline inched down 1.46 cents to $1.4430 a gallon.

But experts warned oil prices could spike in the event of a cold blast in the northeastern U.S. or other major fuel consumers in the Northern Hemisphere and said the market was eyeing the weather closely. With winter weather starting to blanket the United States, demand continues to be a key focus for the oil market.

"The question is really about the weather, and how cold it will get in the U.S. Northeast," said energy analyst Victor Shum of Texas-headquartered Purvin & Gertz in Singapore. "Heating oil inventories grew but remain on the low end of the historical range."

"So you can expect any freak weather to drive the market up," Shum said.

Analysts said to expect a firm floor to be kept under prices as concerns remained over the pace of U.S. Gulf of Mexico oil and gas facilities from Hurricanes Katrina and Rita, which limited refining capacity in the region and had sparked fears of shortages this winter.

Nymex natural gas lost 16 cents to $11.460 per 1,000 cubic feet.

Source: Associated Press/AP Online

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