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Oil Prices Fall Below $66 Per Barrel

Posted on: Wednesday, 25 January 2006, 18:00 CST

WASHINGTON - Crude oil futures fell more than $1 a barrel Wednesday as U.S. supplies of gasoline rose last week and above-normal winter temperatures in the U.S. kept demand for home-heating fuels in check.

But analysts said militant attacks in Nigeria and Iran's nuclear standoff with the West would keep petroleum prices firm for the forseeable future.

In its weekly petroleum supply report, the Energy Department said domestic inventories of crude oil shrank last week by 2.3 million barrels to 319.1 million barrels.

But U.S. oil supplies remained 11 percent above year ago levels and traders shrugged off the decline in inventories, attributing it to reduced imports because of a Texas ship channel that was closed after a barge accident.

Gasoline inventories grew by 3.2 million barrels to 214.8 million barrels, putting them about 2 percent below last year. The supply of distillate, which includes heating oil and diesel, rose by 1.8 million barrels to 136.5 million barrels, or 11 percent higher than year ago levels.

Over the past four weeks, demand for gasoline, jet fuel and distillates was about equal to year ago levels.

Light sweet crude for March delivery fell $1.21 to settle at $65.85 a barrel on the New York Mercantile Exchange. At London's ICE Futures exchange, March Brent lost $1.11 to $64.23 a barrel.

Heating oil futures declined by 2.65 cents to $1.7906 a gallon, while gasoline futures slid 7.98 cents to $1.6646 a gallon. Nymex natural gas fell 22.2 cents to settle at $8.46 per 1,000 cubic feet.

Analysts said fears of potential supply disruptions from major oil producer Iran and more attacks in Nigeria, Africa's largest oil exporter, would keep a firm floor under prices.

"Risks to oil price will continue to remain on the upside, with prices unlikely to fall materially until these factors have been resolved," Merrill Lynch said in a research note.

Officials of the Italian oil company Eni SPA said an armed assault on its offices in Nigeria left nine people dead Tuesday.

The attack was the latest in a recent rash of violence across the Niger delta, where four foreign oil workers also are being held hostage and nearly two dozen people have been killed.

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

Source: Associated Press/AP Online

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