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Oil at 15-week low under $59

Oil at 15-week low under $59
Wed Nov 9, 2005 10:55 PM ET
By Jiwon Chung

TOKYO (Reuters) - Oil prices slid to a new 15-week low near $58 on Thursday after a big increase in U.S. crude stocks added pressure to a market already reeling from lacklustre demand growth and mild weather.

U.S. light crude oil tumbled 43 cents or 0.73 percent to $58.50 a barrel, having hit a low of $58.36 a barrel in electronic trade, its weakest level since July 25.

London Brent crude stood at $56.45, down 43 cents.

Oil prices have plunged more than 17 percent from their late-August record high as signs of weak oil consumption growth and rising stockpiles in the United States overshadow the damage caused by hurricanes in the U.S. Gulf of Mexico.

Crude supplies in the U.S. rose by a more-than-expected 4.5 million barrels last week, bringing inventories nearly 13 percent above last year, the U.S. Energy Information Administration said in a weekly report Wednesday.

"(U.S. data) showed quite bearish numbers," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures. "Prices may fall rapidly to $56 unless we have cold weather."

The build in crude stocks offset a 1.5 million barrel decline in heating oil supplies in the same period, which defied expectations from analysts anticipating a build due to unusually warm weather in the U.S. Northeast.

U.S. heating oil stockpiles are still 4 percent higher than last year while kerosene inventories in No. 3 oil consumer Japan, where mild conditions have also curbed demand this year, stand more than 8 percent above their five-year average.

Adding pressure on Wednesday, U.S. oil production from the Gulf of Mexico, home to about a quarter of domestic oil supply, continued to recover from hurricane damage, with the output rate rising over 50 percent of the normal 1.5 million bpd.

"Production in the Gulf has risen dramatically and refinery input has also risen, these are good selling factors," Emori said.

Prices still remain high enough to draw the ire of consumers and politicians, as U.S. Senators on Wednesday fired questions on topics ranging from refinery expansions to oil price-setting policy at five executives from oil majors.

Some executives retorted that U.S. regulations have stymied domestic oil exploration and refinery expansion, exacerbating the global capacity crunch that has fueled oil's rally. Despite their recent retreat, oil prices are up by a third since January.

Oil companies and major producers are investing some of their windfall proceeds in new oilfields and refineries, but some analysts have warned that these efforts could be delayed, meaning prices may stay higher for longer.

Top oil exporter Saudi Arabia may fail to meet its 2009 target for raising output capacity by 1.5 million barrels per day (bpd) due to a shortage of oil rigs and equipment, a former top official at state oil firm Saudi Aramco told Reuters.


LINK: http://today.reuters.com/news/newsArticle.aspx?type=businessNews&storyID=2005-11-10T035449Z_01_F...