Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/sp/article/2008/200806/20080626/article_364628.htm
Crude futures fall sharply as US says oil, fuel stocks higher than expected
Created: 2008-6-26 8:19:31
CRUDE oil futures fell sharply yesterday after the Energy Department said the United States' stockpiles of fuel and oil were larger than expected last week, evidence that the soaring price for gasoline has sliced into Americans' demand for fuel. The Federal Reserve's decision to hold interest rates steady had little impact on trading.
Light, sweet crude for August delivery fell US$2.45 to settle at US$134.55 on the New York Mercantile Exchange. In London, August Brent crude futures fell US$2.13 to settle at US$134.33 a barrel on the ICE Futures exchange.
In its weekly inventory report, the department's Energy Information Administration said crude oil stocks rose slightly last week. Analysts surveyed by research firm Platts had expected a 1.7 million barrel decline.
Gasoline supplies fell less than expected. And inventories of distillates, which include diesel fuel and heating oil, rose much more than expected.
Demand for gas, meanwhile, fell 2.1 percent.
"At some point, that's going to bring (gas) prices down," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
The Federal Reserve, meanwhile, held a key interest rate steady, ending its string of consecutive rate cuts. The move was expected and as a consequence, oil futures changed little from where they were trading before the announcement.
"There's nothing in the statement that changed traders' minds," Flynn said.
Some economists interpreted Fed comments that accompanied the announcement as meaning there will be no interest rate increases until late in the year.
Interest rates affect the dollar, and the Fed's campaign of rate cuts, which began in September, has sent the greenback into a protracted decline against the euro. Many analysts believe this slide is a big part of the reason oil prices have nearly doubled over the past year.
Many investors buy commodities such as oil as a hedge against inflation when the dollar weakens. Also, a weaker dollar makes oil cheaper to investors dealing in other currencies, such as the euro.
While oil investors moved quickly past the Fed announcement, they were clearly worried by the EIA demand figures. The energy market has grown increasingly sensitive to evidence of falling demand. Data suggesting gasoline consumption is falling emerges almost daily, including in reports from the Energy and Transportation departments, the International Energy Agency and private surveys. A MasterCard report released Tuesday said demand for gasoline fell 2.7 percent last week compared to the same week last year, and is off by an average of 3.6 over the last four weeks compared to the same period in 2007.
"Gasoline and total refined product demand continues to deteriorate in the face of record high oil prices," said Ann Kohler, an analyst at Caris & Co, in a research note.
Many analysts believe the weekly EIA reports underestimate the rate at which gas demand is falling.
The weekly inventory report tends to trigger volatile trading in oil futures, especially since prices have risen to record levels near US$140.
Prices were also influenced Wednesday by a separate EIA report that predicted oil production will increase in Azerbaijan, Brazil, Canada, Kazakhstan and the United States in coming years, pulling oil prices down to around US$70 a barrel by 2015.
Despite their plunge yesterday, oil futures remain within the range in which they've traded for more than two weeks, roughly between US$131 and US$140.
In other Nymex trading yesterday, July gasoline futures fell 6.94 cents to settle at US$3.3941 a gallon, while July heating oil futures dropped 6.44 cents to settle at US$3.7492 a gallon. July natural gas futures fell 25.8 cents to settle at US$12.753 per 1,000 cubic feet.
Light, sweet crude for August delivery fell US$2.45 to settle at US$134.55 on the New York Mercantile Exchange. In London, August Brent crude futures fell US$2.13 to settle at US$134.33 a barrel on the ICE Futures exchange.
In its weekly inventory report, the department's Energy Information Administration said crude oil stocks rose slightly last week. Analysts surveyed by research firm Platts had expected a 1.7 million barrel decline.
Gasoline supplies fell less than expected. And inventories of distillates, which include diesel fuel and heating oil, rose much more than expected.
Demand for gas, meanwhile, fell 2.1 percent.
"At some point, that's going to bring (gas) prices down," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
The Federal Reserve, meanwhile, held a key interest rate steady, ending its string of consecutive rate cuts. The move was expected and as a consequence, oil futures changed little from where they were trading before the announcement.
"There's nothing in the statement that changed traders' minds," Flynn said.
Some economists interpreted Fed comments that accompanied the announcement as meaning there will be no interest rate increases until late in the year.
Interest rates affect the dollar, and the Fed's campaign of rate cuts, which began in September, has sent the greenback into a protracted decline against the euro. Many analysts believe this slide is a big part of the reason oil prices have nearly doubled over the past year.
Many investors buy commodities such as oil as a hedge against inflation when the dollar weakens. Also, a weaker dollar makes oil cheaper to investors dealing in other currencies, such as the euro.
While oil investors moved quickly past the Fed announcement, they were clearly worried by the EIA demand figures. The energy market has grown increasingly sensitive to evidence of falling demand. Data suggesting gasoline consumption is falling emerges almost daily, including in reports from the Energy and Transportation departments, the International Energy Agency and private surveys. A MasterCard report released Tuesday said demand for gasoline fell 2.7 percent last week compared to the same week last year, and is off by an average of 3.6 over the last four weeks compared to the same period in 2007.
"Gasoline and total refined product demand continues to deteriorate in the face of record high oil prices," said Ann Kohler, an analyst at Caris & Co, in a research note.
Many analysts believe the weekly EIA reports underestimate the rate at which gas demand is falling.
The weekly inventory report tends to trigger volatile trading in oil futures, especially since prices have risen to record levels near US$140.
Prices were also influenced Wednesday by a separate EIA report that predicted oil production will increase in Azerbaijan, Brazil, Canada, Kazakhstan and the United States in coming years, pulling oil prices down to around US$70 a barrel by 2015.
Despite their plunge yesterday, oil futures remain within the range in which they've traded for more than two weeks, roughly between US$131 and US$140.
In other Nymex trading yesterday, July gasoline futures fell 6.94 cents to settle at US$3.3941 a gallon, while July heating oil futures dropped 6.44 cents to settle at US$3.7492 a gallon. July natural gas futures fell 25.8 cents to settle at US$12.753 per 1,000 cubic feet.
Agencies
Copyright © 2001-2009 Shanghai Daily Publishing House