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Oil Prices Slump on Flagging Fuel Demand

Oil Prices Slump on Flagging Fuel Demand
Friday October 14, 12:06 pm ET
By Gillian Wong, Associated Press Writer
Oil Prices Head Below $62 a Barrel on Flagging Fuel Demand, Refinery Recoveries

SINGAPORE (AP) -- Crude-oil futures fell more than $1 a barrel Friday, extending their losses amid signs of weak U.S. gasoline demand coupled with reports that more refineries in the U.S. Gulf region were back on line after hurricanes Katrina and Rita.

Light, sweet crude for November delivery slipped $1.48 to US$61.60 a barrel in midday trading on the New York Mercantile Exchange. Front-month crude futures are down 13 percent from their intraday peak of US$70.85 on Aug. 30.

Nymex gasoline futures fell 8.79 cents to US$1.67 per gallon -- almost $1 below the settlement peak of $2.6145 per gallon set on Aug. 31. Heating oil futures declined by 7 cents to $1.9266.

On London's International Petroleum Exchange, November Brent crude futures, which expire at the end of trading Friday, were down $1.10 at US$59.04 a barrel.

Oil prices dipped on signs of flagging U.S. demand for gasoline and heating oil, although there are still concerns that lower supplies due to hurricane-related shutdowns may not be adequate, particularly as it gets colder in the Northern Hemisphere.

"Traders are looking at weaker demand, and that's the main reason why they are just sitting in the market right now," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

The U.S. Energy Department's Energy Information Administration said Thursday that U.S. gasoline demand was 2.4 percent lower than the same period last year, averaging 8.882 million barrels a day last week. Demand for distillate fuel -- which includes heating oil, jet fuel and kerosene -- averaged 3.9 million barrels a day, 4 percent lower than a year ago.

But the agency also reported large declines in gasoline and distillate inventories, saying gasoline stocks fell 2.7 million barrels to 192.8 million barrels, nearly 6 percent lower than year-ago levels.

Inventories of distillate fuel dropped 3.4 million barrels to 124.6 million barrels -- about 2 percent higher than a year ago, but in the lower half of the average range for this time of year.

Crude oil inventories gained 1 million barrels to 306.4 million barrels in the week ending Oct. 7 from a week earlier -- the first increase since Hurricane Katrina struck the Gulf Coast in August, the EIA said. Crude stocks remain about 11 percent higher than they were a year ago.

U.S. refinery utilization rose 5.1 percent last week to about 75 percent of operable capacity after plunging nearly 17 percent in the aftermath of Hurricane Rita, the EIA said, as more reports of refinery recoveries trickled in.

Chevron Corp. said it restarted its Pasagoula, Mississippi, refinery, which was shut down prior to Katrina. It produces 325,000 barrels a day of refined products.

But as of Thursday, 68.8 percent of daily oil production in the Gulf and 56.7 percent of natural gas production remained blocked as platforms and rigs recover, according to the U.S. Minerals Management Service.

Nymex natural gas futures declined by 28.3 cents Friday to $12.82 per 1,000 cubic feet.


LINK: http://biz.yahoo.com/ap/051014/oil_prices.html?.v=9