Oil $($61.50) , Gasoline Plunge with stockpiles & Bush Gives Diplomacy a Chance With Iran
By Mark Shenk
Sept. 19 (Bloomberg) -- Crude oil and gasoline fell to the lowest in almost six months after U.S. President George W. Bush said he will give diplomacy a chance to end a dispute with Iran, the fourth-biggest oil producer, over the country's nuclear program.
Bush said today that members of the European Union will continue negotiations with Iran on suspending enrichment. Once Iran halts uranium processing, ``the United States will come to the table,'' he said.
``The Bush speech was tame relative to what a lot of us expected,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``He didn't take as aggressive a tone as he could have with Iran and appears to have moved to the European position.''
Hedge funds are selling futures after losing money on bets in the energy market, analysts said. Prices also fell on speculation that a government report tomorrow will show that the U.S. has ample fuel supplies before the heating season.
Crude oil for October delivery fell $2.14, or 3.4 percent, to $61.66 a barrel on the New York Mercantile Exchange, the lowest close since March 21. It was the biggest one-day decline since May 15. Futures have plunged 21 percent from a record $78.40 a barrel on July 14 as tensions in the Middle East eased.
Amaranth Advisors LLC, a hedge-fund manager overseeing about $9.5 billion, told investors that its two main funds fell an estimated 50 percent this month because of a plunge in natural-gas prices.
Hedge Fund Bets
Hedge-fund managers and other large speculators last week reduced their bets on higher oil prices, according to the Commodity Futures Trading Commission. Speculative long positions, or bets prices will rise, outnumbered short positions by 37,020 contracts in New York in the week ended Sept. 12, the Washington- based commission said on Sept. 15. That was down 22 percent, from a week earlier.
``These funds can go short as quickly as they went long,'' said Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina. ``I think the most important thing at the moment is how lush product inventories are.'' Shorts are bets that prices will fall.
An Energy Department report tomorrow is expected to show that U.S. supplies of distillate fuel, a category that includes heating oil and diesel, and gasoline rose last week, according to the median of responses in a Bloomberg News survey. Crude oil, distillate and gasoline supplies in the week ended Sept. 8 were above the five-year average, the department said last week.
Gasoline for October delivery fell 7.58 cents, or 4.8 percent, to $1.5038 a gallon, the lowest close since Feb. 22. Pump prices have followed futures lower. Regular gasoline, averaged nationwide, is down 11 percent from a year ago, the AAA, the nation's largest motorist organization, said. Gasoline fell 0.8 cent yesterday to an average $2.487 a gallon.
Bush's Speech
``Iran must abandon its nuclear weapons ambitions,'' Bush said in an address to the United Nations General Assembly in New York today. Directing remarks to the Iranian people, he said, ``Despite what the regime tells you, we have no objection to Iran's pursuing of a truly peaceful nuclear power program. We are working toward a diplomatic solution to this crisis.''
Asked about French President Jacques Chirac's suggestion that sanctions be taken off the table temporarily as an incentive to get Iran back to negotiations, Bush said the U.S. and France agree on a strategy while warning Iran that ``time is of the essence.'' Iran missed an Aug. 31 United Nations deadline for suspending its uranium enrichment program.
Brent crude oil for November settlement fell $1.88, or 2.9 percent, to close at $62.17 a barrel on the London-based ICE Futures exchange.
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