Oil ($56.85) Falls for a Second Day on Speculation OPEC Won't Meet Cuts
By Angela Macdonald-Smith and Hector Forster
Oct. 23 (Bloomberg) -- Crude oil fell for a second day in New York because of speculation that the Organization of Petroleum Exporting Countries members will fail to cut production by as much as planned.
The agreement to lower output by 1.2 million barrels a day comes as four of OPEC's 10 members with quotas already produce below their assigned amounts. U.S. stockpiles of oil, gasoline, heating oil and diesel are higher than the average for this time of year.
``There are doubts about the ability of OPEC to really stick to the cuts that they've stated,'' said Andrew Harrington, a commodities analyst at Australia & New Zealand Banking Group Ltd. in Sydney. ``The announced cut was greater than expected but it still didn't seem to scare the market very much. We're likely to see more softness.''
Crude oil for December fell as much as $1.07, or 1.8 percent, to $58.26 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $58.94 at 9:20 a.m. Singapore time.
On Oct. 20, the December contract fell $1.17, or 1.9 percent, to $59.33 a barrel. The November contract, which expired at the close on Friday, fell 2.9 percent to $56.82, the first time this year that the monthly contract nearest to delivery closed below $57 a barrel.
Twenty-one of 49 analysts, traders and brokers in a weekly Bloomberg News survey said prices will decline this week. Fourteen forecast an increase and 14 predicted little changed. The survey was carried out before OPEC formally announced production cuts.
November Cuts
The 4.4 percent reduction starting Nov. 1 will be based on how much members were pumping last month, rather than quotas, United Arab Emirates Oil Minister Mohamed al-Hamli, who will become OPEC president in 2007, said Oct. 20 after members met in Doha, Qatar.
The 10 OPEC members with quotas produced 27.6 million barrels a day last month, lower than the combined quotas of 28 million barrels a day. Nigeria, Iran, Venezuela and Indonesia now pump less oil than their official allocations or quotas, according to Bloomberg estimates. Algeria, Libya, Saudi Arabia and the United Arab Emirates are pumping more.
U.S. crude oil inventories surged 5.02 million barrels to 335.6 million in the week ended Oct. 13, the Energy Department reported Oct. 18. It was the biggest increase since March and left stockpiles 14 percent higher than the five-year average for the week.
Supplies Fall
Supplies of distillate fuel, a category that includes diesel and heating oil, and gasoline fell in the week. U.S. refineries had their lowest operating rate since April as companies shut units for maintenance.
``We are likely to see more of what happened last week, with crude inventories up and products down,'' Harrington said.
The U.S. gasoline pump price fell eight cents in the past two weeks to $2.20 a gallon, the lowest this year, as crude oil prices declined, Trilby Lundberg said, citing her survey of about 7,000 filling stations nationwide.
Prices for regular gasoline have declined 82.5 cents from a record average $3.025 a gallon reached in mid-August as lower demand following the end of the summer driving season has kept inventories above average. Wholesale gasoline futures in New York fell to the lowest since February on Oct. 17.
Gasoline for November delivery fell 7 cents, or 0.1 percent to $1.4665 a gallon in after-hours trading on the New York Mercantile Exchange.
To contact the reporters on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net ; Hector Forster in Tokyo at hforster@bloomberg.net .
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