Oil drops below $59 on inventory build

By Madlen Read

Associated Press Business Writer

Oil prices dropped Nov. 9 after the U.S. government reported that inventories of crude and gasoline grew in the last week.

However, distillate fuel inventories posted a drop for the seventh-straight week, keeping alive fears that heating oil may be in short supply going into the winter months.

Light sweet crude futures for December delivery on the New York Mercantile Exchange fell 8 cents to $58.90 a barrel in morning trading.

Gasoline futures fell 2.23 cents to $1.54 a gallon, while heating oil futures were little changed at $1.7710 a gallon.

December Brent crude futures on the ICE Futures exchange in London fell 53 cents to $57.28 a barrel.

U.S. crude-oil inventories rose 4.5 million barrels to 323.6 million barrels in the week ending Nov. 4 from a week earlier, the U.S. Department of Energy’s Energy Information Administration said in its weekly petroleum report. Crude stocks are about 13 percent higher than they were a year ago.

Gasoline inventories rose by 4.2 million barrels to 201.1 million barrels — nearly 2 percent lower than year-ago levels, but now in the upper half of the average range for this time of year.

Inventories of distillate fuel, which includes diesel and heating oil, slipped by 100,000 barrels to 120.8 million barrels, but remain nearly 2 percent higher than a year ago.

The builds in crude and gasoline inventories beat analysts’ expectations, but the drop in distillates was a disappointment. Analysts surveyed by Dow Jones Newswires expected crude inventories to build by 1.4 million barrels, gasoline inventories to rise by 485,000 barrels and distillate stocks to increase by 600,000 barrels.

The report also suggested that U.S. demand for gasoline is still behind last year’s levels, but catching up — motor gasoline demand averaged 9.1 million barrels a day last week, just 0.4 percent below the same period last year. Meanwhile, distillate fuel demand in the last week surpassed year-ago levels, averaging 4.1 million barrels a day, or 0.4 percent more than a year ago.

Oil prices had come under selling pressure earlier in the week amid mild weather in the U.S. Northeast, the world’s biggest heating oil market.

But the front-month contract settled higher Nov. 8 as the U.S. Energy Information Administration revised upward its U.S. gasoline demand forecast for the fourth quarter and next year.

Nymex natural gas for December delivery fell 7.3 cents to $11.720 per million British thermal units Nov. 9.

Oil prices are almost 16 percent below their late August highs above $70 a barrel.

But PVM Oil Associates in Vienna said it expected “fundamental (price) support in the mid term.”

Because of hurricane damage, “the loss of production in the U.S. Gulf is substantial, recovering only yesterday to more than 50 percent,” it said. “PVM is also skeptical concerning non-OPEC supply ... (and) additional capacity to be expected from OPEC will (be) limited in the next three years.”