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Oil Prices Dip on Crude Stock Expectations

Posted on: Tuesday, 14 February 2006, 06:00 CST

By GILLIAN WONG

SINGAPORE - Oil prices extended declines Tuesday, dropping below $61 a barrel amid expectations that a U.S. supply report will show higher crude inventories.

Light, sweet crude for March delivery fell 43 cents to $60.81 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract had lost 60 cents Monday to $61.24 a barrel, the lowest settlement this year.

April Brent futures on London's ICE Futures exchange fell 17 cents to $60.45 a barrel.

Traders predicted the U.S. Energy Department's weekly petroleum supply snapshot, due Wednesday, would likely show climbing oil stocks for the seventh straight week.

U.S. commercial crude-oil stocks - already well above the average level for this time of year - are expected to gain another 1 million barrels in inventory data, according to the average of 10 analysts' estimates in a survey conducted by Dow Jones Newswires.

Traders remained concerned about the international dispute over Iran's nuclear activities and to a lesser extent unrest in Nigeria, but oil futures have slipped on reports of lagging demand and bulging supplies.

Sucden Commodity brokers noted that oil prices have fallen about 10 percent over the past month. "Demand is currently lower than expectations and stocks of crude and heating oil are high compared to a year ago, while gasoline stocks are rising, pressuring the market," it said.

The International Energy Agency, the Paris-based energy watchdog, reported falling demand due to high costs of crude.

"The price is completely oversold and has reached quite an important level now - $60 a barrel is a psychological support level, if we get more bearish information we may see another huge decline to $55," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures.

Emori said traders were watching gasoline demand and preparing to accumulate stocks as U.S. refineries started seasonal maintenance over the next three months, which is expected to limit supply of the fuel ahead of the peak demand summer driving season.

Unleaded gasoline fell nearly a cent to $1.4225 a gallon as energy analysts estimated an average rise in gasoline stocks of 1.5 million barrels last week, marking seven straight weeks of increases.

Distillate stocks, which include heating oil and diesel fuel, are expected to fall 500,000 barrels in government and industry petroleum-inventory data due Wednesday. Heating oil fell almost a cent to $1.6300 a gallon.

Source: Associated Press/AP Online

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