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Oil Prices Take a Dive As Crude Inventories Swell COMMODITIES MARKETPLACE By Bloomberg

Posted on: Tuesday, 21 March 2006, 12:00 CST

By Mark Shenk

Crude oil prices fell the most in seven months on Monday as U.S. inventories approached a seven-year high, easing concern about supply disruptions in Nigeria and Iraq.

Economists surveyed by Bloomberg said stockpiles probably rose 2.8 million barrels last week. Supplies jumped 4.8 million barrels to 340 million in the week ended March 10, the highest since May 1999, the Energy Department said. Oil has been bolstered by unrest, which has trimmed Nigerian and Iraqi output, and the possibility of an Iranian cut.

"When prices are at these heights you need fresh worrisome news to keep us moving higher," said John Kilduff at Fimat USA. "Crude inventories are swelling globally. We'll be paying attention to gasoline because there is a question about supplies as summer approaches." Crude oil for April delivery plunged $2.35 to $60.42 a barrel on the New York Mercantile Exchange. It was the biggest single-session decline since Aug. 17. Prices are up 6.5 percent from a year ago.

Oil stockpiles have jumped 6 percent in the Energy Department's past five weekly reports. The department is scheduled to release the next report on Wednesday. Gasoline and distillate fuel stockpiles probably fell last week, analysts say.

"Crude gained a lot last week and we are giving some of that back," said Joseph Allman at RBC Capital Markets in Houston. "The U.S. led a large attack in Iraq last week, one that wasn't unprecedented, but the media got a hold of it and the market reacted."

Wheat prices fell to a five-week low on speculation that rain and snow in the Great Plains would help revive drought-stressed crops in the United States. Wheat futures for May delivery fell 7.25 cents to $3.5025 a bushel on the Chicago Board of Trade after touching $3.4875, their lowest since early February.

Gold prices rose amid concern that the Iraq war and Iran's nuclear ambitions could disrupt securities markets, prompting some investors to buy the metal as a haven. Gold futures for April delivery rose $1 to $556.10 on the New York Mercantile Exchange.

Source: International Herald Tribune

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