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| Oil prices drop to below $54 a barrel |
1/12/2007 |
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Oil prices extended their decline Thursday, briefly falling below $53 a barrel, after US government data showed a larger-than-expected increase in domestic inventories of gasoline and heating oil.
The easing of tensions between Russia and Belarus and the resumption of oil shipments through Belarus toward EU consuming countries also contributed.
Light, sweet crude for February delivery dropped 60 cents to $53.42 in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract had fallen $1.62 on Wednesday to end at a 19-month low of $54.02 a barrel, and touched a low of $52.94 in Thursday trading.
Brent crude for February delivery dipped 16 cents to $53.53 a barrel on the ICE Futures exchange in London.
Oil prices have declined more than 11 percent the past two weeks, as speculators have sent futures lower on expectations of lower winter demand and a belief that the Organisation of Petroleum Exporting Countries lacks the discipline to comply with its recent output cuts.
The US Energy Information Administration reported that commercial stockpiles of gasoline jumped 3.8 million barrels last week to 213.3 million barrels, while inventories of distillate fuels, which include heating oil, climbed 5.4 million barrels to 141 million barrels.
"The market is overwhelmingly bearish and in Asia, the market is reacting to the very bearish product increase which went up quite a bit,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
It''s not just energy prices that have been falling. The broader commodities market have taken a hit in 2007 by what some analysts say has been an exodus of investment fund money. Industrial metals such as copper, and precious metals including gold, have dropped since the year began.
“The financial market is rebalancing its portfolio and shifting money out of commodities. Oil has been plunging together with metals,” Shum said.
Adding to the selling pressure Thursday was news that Russia and Belarus had resolved their dispute over oil supplies. Russian oil was flowing again through a Belarusian pipeline late Wednesday, according to Belarusian official Alexei Kostuchenko, general director of pipeline operator Gomeltransneft-Druzhba.
Still, Vienna"s PVM Oil Associates suggested that even if the dispute had continued it would not have added too much upward pressure to prices, noting that “shortfalls in crude oil supply to Europe can be easily replaced from strategic reserves and by utilising OPEC’s rising excess production capacity.”
Crude oil’s steep decline has spurred predictions of further losses and even an end to the eight-year bull market, which led oil from a low of $10.35 in 1998 to the record highs of last summer.
Speculators who for years bet on rising energy prices have started adding to bets on falling prices, according to the latest US government data.
“I’ve already said last year that oil prices should be going towards $40 a barrel so there’s nothing special. Its no surprise to see it drop below $55,” said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. AP
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