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Well-Cushioned U.S. Stockpiles Undercut Oil Price COMMODITIES MARKETPLACE By Bloomberg

Posted on: Friday, 16 December 2005, 12:00 CST

By Mark Shenk

The price of crude oil fell Thursday for a second day after a government report showed that U.S. stockpiles last week were 11 percent higher than the recent averages.

"The fundamentals for crude oil aren't that good," said Bill O'Grady, an analyst with A.G. Edwards & Sons in St. Louis, Missouri. "I might be able to justify prices in the $57 to $58 range, but not between $60 and $61 a barrel.'

U.S. crude oil inventories have jumped in 8 of the past 10 weekly reports from the Energy Department. Stockpiles rose 892,000 barrels to 321.2 million last week, leaving supplies 9.3 percent higher than a year earlier, the department said Wednesday.

Crude oil for January delivery fell 74 cents to $60.11 a barrel in afternoon trading on the New York Mercantile Exchange. Oil reached a record price of $70.85 a barrel on Aug. 30, the day after Hurricane Katrina struck Louisiana and Mississippi. Prices are 37 percent higher than a year ago.

Heating oil for January delivery fell $4.50 to $180 a gallon in New York.

The price of gold was little changed in New York, erasing early losses, as some investors bought the metal after a 4.1 percent drop Tuesday and Wednesday. The most active gold futures contract had its biggest decline in a year Wednesday 2.8 percent after the Tokyo Commodities Exchange raised its trading margins to curb speculation.

The price of gold has climbed by around 15 percent this year.

"There was a lot of pressure to sell off on the way down," said Domenick Nardo, a trader at FIC Commodities. Gold futures for February delivery were $506.60 an ounce, down $2.90, in afternoon trading on the Comex division of the New York Mercantile Exchange. Prices earlier dropped as much as $6.80 and later rallied to gain as much as $1.30.

The shortfall in zinc widened in the first 10 months of the year as demand outstripped production, the International Lead and Zinc Study Group said. Demand for the metal rose 0.5 percent to 8.81 million metric tons through October, beating production by 459,000 tons, the London-based group said in a report. The deficit was 329,000 tons a year earlier.

Source: International Herald Tribune

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