FinancialAdvisor's College Class (FACC)

[FinancialAdvisor]

Oil Prices Fall Further Below $58 a Barrel

Oil Prices Fall Further Below $58 a Barrel
Friday November 11, 8:25 am ET
By George Jahn, Associated Press Writer
Oil Prices Fall Further Below $58 a Barrel in Response to Rising Supply, Falling Demand

VIENNA, Austria (AP) -- Crude oil futures slipped further Friday, approaching levels not seen since the summer in response to rising supply and falling demand.

Analysts said that with crude plentiful for now, any short-term upward pressure on prices would likely come from heating oil and diesel with the arrival of the Northern Hemisphere winter.

Light, sweet crude for December delivery fell 55 cents to $57.25 a barrel on the New York Mercantile Exchange by afternoon in Europe after trading as low as $56.93. On Thursday, the contract closed at $57.80, the lowest level for the front-month contract since July 21.

Ehsan Ul-Haq, chief analyst at PVM Oil Associates in Vienna, said that if oil closed below $57 a barrel, it would be the first time since June 30, when it closed at $56.58.

Brent crude slipped 63 cents to $55.05 on the ICE Futures exchange.

Heating oil was down more than a cent at $1.7310, while gasoline slid nearly 2 cents to $1.4890 a gallon.

The U.S. Energy Information Administration had released data this week showing that natural gas in storage grew more than expected last week, surpassing a level that many analysts believe is necessary to meet winter demand.

And the Paris-based International Energy Agency said in a monthly report that global oil demand growth in 2005 would be slightly lower than previously expected.

The reports gave momentum to a price decline under way due to a moderation in gasoline demand and warmer-than-usual weather in the U.S. Northeast and Midwest, key markets for heating oil.

"We don't have any big demand right now. Heating is not upon us yet, cooling is behind us and the summer driving season is behind us," said James Cordier, president of Liberty Trading Group in Tampa, Fla. "If you're going to have a soft spot, this is it."

Cordier said the downtrend was likely to be stopped in its tracks by late December, assuming normal winter temperatures.

With energy prices falling despite the continued loss of output of oil, natural gas and gasoline in the aftermath of hurricanes Katrina and Rita, Cordier said it is a clear indication that the market is being driven by a dropoff in demand.

He added that demand should pick up again later in the year, assuming normal winter weather patterns.

PVM Oil Associates agreed, saying "distillates could push up the market when a cold snap hits key consuming regions."

In the U.S. Northeast, forecasts are for significantly colder weather next week.

Natural gas was up 27 cents at $11.65 per 1,000 cubic feet.

On Wednesday, the U.S. Energy Information Administration said crude oil inventories rose 4.5 million barrels to 323.6 million barrels in the week ended Nov. 4 from a week earlier. Crude stocks are about 13 percent higher than they were a year ago.

Data showed that U.S. storage of natural gas grew last week to 3.2 trillion cubic feet -- a level many analysts consider a crucial measure of adequate pre-winter supply.

The IEA lowered its forecast for global oil demand growth in 2005 by 70,000 barrels a day to 1.2 million barrels per day. The agency also said that OPEC's production capacity could rise by 1.2 million barrels per day to 33 million barrels per day by the end of next year.


LINK: http://biz.yahoo.com/ap/051111/oil_prices.html?.v=4