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Oil Prices Ease Ahead of Inventory Data

Oil Prices Ease Ahead of Inventory Data
Wednesday August 17, 8:40 am ET
By Edith Balazs, Associated Press Writer
Oil Prices Ease Ahead of U.S. Petroleum Inventory Data, Expected to Show Rise in Gas Stocks

BUDAPEST, Hungary (AP) -- Crude-oil futures eased Wednesday before the release of the weekly U.S. petroleum inventory report, which is expected to show a rise in gasoline and crude stocks.

But uncertainty continued to dampen market sentiment as traders remained wary over the refinery situation in the U.S., Iran's nuclear showdown and news that protesters had shut down an oil pipeline in Ecuador.

Front-month September contracts fell 6 cents from Tuesday's settlement price to $66.02 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. The have eased steadily since hitting a record of $67.10 a barrel in intraday trading on Friday.

In other Nymex prices, heating oil was down nearly a cent to $1.8575 a gallon, while gasoline fell marginally to $1.9823.

On London's International Petroleum Exchange, October Brent was 15 cents lower at $64.93 a barrel.

Analysts said prices would continue declining in the short-term, as the summer driving season draws to an end and the U.S. shows healthy stocks of crude. But bullish sentiment was expected to return in the long-term with the approach of winter in the Northern Hemisphere.

"We just have to get used to the probability that oil is trading in a much higher range and for much longer than previously expected, and an upper price ceiling is almost impossible to determine at this moment," said Alex Scott, oil analyst at Seven Investment Management in London.

A monthly report released Wednesday by the Organization of Petroleum Exporting Countries said the pace of oil demand is expected to rebound next year, supporting long-term bullish arguments.

"Average world oil demand for 2006 is projected to grow by 1.6 million barrels a day or 1.9 percent to average 85.2 million barrels a day," the report said. "This slightly higher forecast is due to the slightly more optimistic view of the world economy for the coming year."

Prices are now more than 40 percent higher than a year ago, when a furious rally began on troubles and outages in key producers Nigeria, Venezuela, Iraq and Saudi Arabia.

Markets remain shrouded in uncertainty over supply disruptions that could affect output when demand peaks during the Northern Hemisphere winter. A stream of refinery outages in the United States sent markets into a frenzy in recent weeks as oil prices zoomed to new highs.

In Ecuador, protesters halted operations Sunday at a major oil pipeline in the Amazon basin, demanding the state-owned Petroecuador hire more locals and pay higher wages.

A Petroecuador official said more than 50,000 barrels a day has been lost so far -- a relatively tiny figure compared to the global oil market, but still enough to unsettle an already-jittery market.

Also, protesting Nigerian villagers forced the closure of a Royal Dutch Shell PLC oil-pumping facility, cutting production by 10,000 barrels a day, company officials and village leaders said Wednesday. The protesters were angered over Shell's compensation offer to villagers for environmental damage from a 2003 oil spill and fire.

At the same time, traders were expecting weekly data to be released later Wednesday from the U.S. Department of Energy to show a rise in gasoline and crude stocks as refineries slow down output of fuel as the American summer driving season draws to a close.

An average estimate of nine analysts surveyed by Dow Jones projects an increase of 1.2 million barrels of commercial crude oil for the week ended Aug. 12 in the United States.

Still, the robust output to fuel summer could eat into winter needs, analysts said.

"U.S. gas markets are closely watching storage injections, and overall inventory levels are expected to slip below last year's robust levels fairly soon as strong summer demand has eaten into extra supplies available for winter," Energyintel analyst Tom Wallin said.

Analysts have blamed rising demand in the U.S. and China for supply tightness, as excess capacity shrinks to levels that could trouble markets in the event of a major outage.

Associated Press Writer En-Lai Yeoh in Singapore contributed to this report.


LINK: http://biz.yahoo.com/ap/050817/oil_prices.html?.v=5