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Oil prices slip below US $58 per barrel U.S. forecasters predict warmer weather, causing prices to drop; OPEC head expects $45-$55 a barrel oil through 2007 George Jahn Associated Press Writer
Crude futures fell Dec. 27 in thin post-Christmas trading, after U.S. forecasts of milder weather in the week ahead raised traders’ expectations of lower demand for heating fuels.
Prices fell despite the latest figures showing a drop in heating oil stocks.
Light, sweet crude for February delivery slipped 53 cents to US$57.90 a barrel on the New York Mercantile Exchange by afternoon in Europe. The contract on Dec. 23 rose 15 cents to settle at US$58.43 a barrel. On Dec. 26, the market was closed for the Christmas holiday.
Brent crude was down 50 cents at US$56.19 on the ICE Futures exchange.
According to Accuweather.com, temperatures in most of the United States apart from the Northwest will be higher than normal in the next six to 10 days.
“The weather is unusually passive for late December,” the forecaster said.
Milder weather in the world’s largest energy consumer means less heating fuel consumption, which tends to put a downward pressure on oil prices.
The week of Dec. 19 the U.S. petroleum snapshot showed the supply of crude oil rose by 1.3 million barrels to 322.5 million barrels — 12 percent above year ago levels.
But U.S. inventories of distillate fuel, which include heating oil and diesel, fell by 2.8 million barrels to 127.7 million barrels. Gasoline inventories declined by 300,000 barrels to 204.1 million barrels.
“The weather factor seems to have outpaced the stock-draw of gasoline and distillates in the U.S.,” noted Vienna’s PVM Oil Associates in its daily energy market report. Prices reacting to weather Crude futures have in recent weeks been reacting to fluctuations in Northern Hemisphere temperatures, especially in the U.S. Northeast, the world’s biggest heating oil market.
“Ever since winter officially began last week, the weather in the Northeast (and across much of the country) has gone the other way. It’s not that we’re having a heat wave in the Northeast, but we are certainly in a different regime than we were earlier in the month,” said Accuweather forecaster Elliot Abrams in a report.
Abrams said he did not expect any more snow storms to hit the country in 2005.
Nymex heating oil lost 2.58 cents to trade US$1.6795 a gallon while gasoline declined 1.63 cents to US$1.5343 a gallon.
Natural gas, which is most commonly used to heat homes in the Midwest, slipped 93.3 cents to US$11.350 per thousand cubic feet. The contract reached an all-time high of US$15.78 per mcf in mid-December on cold weather and predictions of snow storms.
The price of crude is 19 percent below its all-time high of US$70.85 after Hurricane Katrina made landfall on Aug. 30. OPEC, Russia to meet annually In news that could affect longer term prices, OPEC, which over the past year has tried to reduce market volatility by raising or lowering production, announced that it and Russia, the largest non-OPEC oil exporter, would meet annually on the ministerial level to coordinate policies.
The announcement followed a meeting in Moscow between OPEC’s outgoing president, Sheikh Ahmad Fahad Al Ahmed al-Sabah and Russia’s minister of industry and energy, Viktor Khristenko.
Dow Jones reported Dec. 27 that Sheik Ahmad told the Russian paper Vremya Novostei that OPEC expects oil prices to be between $45 and $55 a barrel through 2007. The sheikh said oil production may rise after two years, and then prices will depend on demand.
“If it increases, prices will go even higher. If not, they will fall a little bit,” the sheikh said.
Sheikh Ahmad said OPEC will meet Jan. 31 to consider lowering production in the spring.
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