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Crude futures slide as supply concerns ease OPEC president sees price declines as ‘positive start’ to price stabilization; crude oil inventories down less than expected The Associated Press
Crude oil prices dipped July 21 after the U.S. Department of Energy’s weekly report on petroleum stocks eased concerns of supply disruptions from hurricanes in the Gulf of Mexico.
In Kuwait, OPEC’s president expressed confidence that price declines over the past two days were “a positive start” to price stabilization. Still, analysts cautioned of a possible time lag, saying next week’s U.S. data could reveal shortfalls caused by the storms.
Light sweet crude for September fell 62 cents by midday in Europe to trade at $57.40 a barrel on the New York Mercantile Exchange. Heating oil dropped more than 1.5 cents to $1.5815 a gallon, while unleaded gasoline was down over a penny, fetching $1.663 a gallon.
On London’s International Petroleum Exchange, September Brent futures slipped 74 cents to $55.91 a barrel.
The U.S. midweek supply report showed a build in distillate fuels — which includes heating oil, diesel and jet fuel — while crude inventories declined less than expected, showing that hurricane Dennis caused little damage to output in the Gulf of Mexico.
Inventories of crude oil slipped by 900,000 barrels to 320.1 million barrels, or 7 percent above year-ago levels, the agency said. Analysts said traders were expecting a decline of at least twice that much. Distillates grew by 2.3 million barrels to 122.7 million barrels, or 5 percent above year-ago levels.
“It really was a bearish surprise to the market,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Flynn said that while the damage to oil production from Hurricane Emily appears to be temporary, the market will remain on edge until a clearer picture develops — and any time a big storm moves through the Gulf of Mexico. While he believes oil prices could theoretically head down toward $50 a barrel this summer, assuming no major supply snags, he maintains that traders will become jittery as the winter heating season approaches.
Dennis has forced shutdowns Dennis had forced several oil fields and rigs to close down when it struck in early July. Its successor, the now-weakening hurricane Emily, missed the United States the week of July 18 but caused precautionary rig evacuations on the U.S. side of the Gulf of Mexico.
Oil workers began returning to rigs in the southern Gulf of Mexico, and Mexican state oil monopoly Petroleos Mexicanos had opened its three main loading ports on July 20, as hurricane Emily hurtled slowly inland.
Another storm, tropical depression 6, was brewing, but appeared to be heading north, and away from the Gulf.
“With Emily missing to the south, tropical depression No. 6 taking a northern track, concerns about hurricanes may ease for the moment,” said David Knapp, an analyst with Energyintel.
Frederic Lasserre, head of commodities research at SG Securities in Paris, described the U.S. report as “fairly bearish,” with a “minor draw on (crude) stocks, and quite a substantial build in distillates.”
“Even the draw on gasoline is quite small,” said Lasserre.
He cautioned, however, about the possibility of further storms and against totally discounting Emily’s effects — including the disruptions caused by the rig closings — saying: “Maybe we can expect some of the impact that we were expecting this time to appear in next week’s (U.S.) report.”
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