Oil eases toward $62 ($62.08/bbl)

Reuters ^ | October 6, 2005 | Jiwon Chung

[RWR8189]

TOKYO (Reuters) - Oil prices fell for a fifth day on Thursday, dipping to their lowest level in two months after U.S. government data showed a drop in oil demand in the world's largest consumer.

U.S. crude futures for November slid 19 cents to $62.60 a barrel, having earlier traded as low as $62.23. London Brent crude was down 32 cents to $59.80.

Oil prices have fallen sharply from their August 30 record high of $70.85 on signs that soaring costs are eroding demand, offsetting fears over tight supplies in the wake of hurricanes that toppled production platforms and shut down refineries.

U.S. government weekly data on Wednesday showed total oil products demand over the past four weeks averaged 19.9 million bpd, or 2.9 percent less than over the same period last year.

"A lot of people are concerned about demand weakness, because the implied demand number (in the weekly U.S. data) looked pretty weak," said Tony Nunan, manager at Mitsubishi Corp.'s international petroleum business.

"The U.S. government also said they were ready to tap the SPR (strategic petroleum reserves), and this put a lid on the market."

Washington offered earlier this week to tap emergency reserves of crude and heating oil if needed to avert a winter fuel shortage, coming after a global release of emergency reserves co-ordinated by the International Energy Agency.

Prices have fallen more than 5 percent this week and nearly 12 percent from the August peak.

Worries over lower demand offset sharp declines in U.S. fuel stocks last week, which were depressed by refiners working at only about 70 percent of capacity, the lowest since the government started keeping weekly records in 1990.

Gasoline stocks in the U.S. fell 4.3 million barrels in the week ended September 30, double analysts' expectations. Distillates, including heating oil, fell 5.6 million barrels, more than forecasts for a 1.9 million-barrel drop.

But some analysts argued that prices may yet rebound as supplies of winter fuel are threatened by the delayed recovery of hurricane-battered U.S. refineries.

"It's almost impossible that oil stocks will build soon amid prolonged plant shutdowns, and supply concerns are still there toward winter," said Hiroyuki Kitakat, director of commodities business at Barclays Capital in Japan.

A dozen refineries, accounting for 18 percent of U.S. total capacity, remained shut after hurricanes Rita and Katrina, a daily loss of more than 1.3 million barrels of gasoline.

Washington said last week up to 15 percent of U.S. refining capacity could be out for at least another couple of weeks.

[RWR8189]

Light, Sweet Crude Oil

10/6/2005 Session Contract Detail for Nov 5

	Last				62.08
	Open High				62.85
	Open Low				62.85
	High				62.95
	Low				61.90
	Settle				62.79
	Change				-.71
	Open Interest				203142
	Volume				0.00
	Last Updated				10/06/2005 06:20:05

Unleaded Gasoline

10/6/2005 Session Contract Detail for Nov 5

	Last				1.8771
	Open High				1.9150
	Open Low				1.9150
	High				1.9150
	Low				1.8700
	Settle				1.9078
	Change				-.0307
	Open Interest				64644
	Volume				0.00
	Last Updated				10/06/2005 06:23:44

Heating Oil

10/6/2005 Session Contract Detail for Nov 5

	Last				1.9826
	Open High				2.0275
	Open Low				2.0275
	High				2.0275
	Low				1.9800
	Settle				2.0148
	Change				-.0322
	Open Interest				65477
	Volume				0.00
	Last Updated				10/06/2005 06:27:04

[eastforker]

You think all those cars,trucks and busses under water might have something to do with that?

[cynicom]

Supply and demand is in charge, right???? Ha...Demand drops, supply increases and the price of gasoline remains the same.

Supposed capitalist experts here on FR need to realize they are being swindled.

[Trust but Verify]

I don't know what article you read, but this one says supplies dropped, as did demand. Further, where I live, gas prices are down by up to $.30/gal from last week's highs.

[Mr Ramsbotham]

Supposed capitalist experts here on FR need to realize they are being swindled.

Prices aren't going to drop immediately for a variety of factors. It takes time for the signals to work their way through the infrastructure. And the price of gasoline is a function not only of the cost of the raw material for making it, but the capacity of refineries to produce it.

If it's all just a matter of distributors trying to swindle the public, why don't they just jack the price up as high as it will go and leave it there? Why does it fluctuate?

[cynicom]

Prices here hanging in there at $2.94. Price of oil declines one or two dollars, nothing happens. Price of oil rises a dollar and gas raises ten cents the same day.

Oil companies in UK are reporting RECORD profits. I guess American companies will be barely hanging on.

[btcusn]

You may be right, but it sure seems to go up a lot faster than down.
Jack

[RWR8189]

Open yourself up a gas station and see if you are more reluctant to take prices down than raise them if the price of your next shipment of gasoline is uncertain...

[cynicom]

My personal doings have nothing to do with the price of gasoline. My only interest is in the shopworn assertion that the price of gasoline is determined by "supply and demand".

[appeal2]

The fact is that gasoline prices lagged crude prices by a lot. When crude was going up, gasoline around NYC stayed in the two and a half buck range, all the way from the low 50's to the high 60's. They didn't break out until Katrina. This tells me what the numbers just revealed that driving was curtailed and consumption was down. Evidently demand for gas isn't totally inelastic.

[Trust but Verify]

They could be giving oil away right now and gas would still be high. Why? Refineries are out of commission. Duh.

[cynicom]

Did you drive up to any station and have them closed because of a lack of gas???? Duh????

[elli1]

...U.S. government weekly data on Wednesday showed total oil products demand over the past four weeks averaged...2.9 percent less than over the same period last year...Gasoline stocks in the U.S. fell 4.3 million barrels in the week ended September 30...A dozen refineries, accounting for 18 percent of U.S. total capacity, remained shut after hurricanes Rita and Katrina, a daily loss of more than 1.3 million barrels of gasoline.

Gasoline price at my local stations (Central Wisconsin) was $2.99 gallon yesterday--increase of 13 cents or so over the last week.

[kenth]

I'd think that while demand on crude has dropped, it's only because refinery capacity is down. That means that demand for end product is up comparitively.

[Trust but Verify]

They're not closed because of lack of gas because of what they are charging for the gas. I guarantee you that if gas prices declined sharply, demand would rise above the level of supply. You would then have shortages and prices would rise through the stratosphere. It's quite simple. It's called equilibrium.

[Trust but Verify]

I was in that part of the state over the weekend and saw prices ranging from $2.89-$3.05. In Milwaukee we have a range of $2.85-$2.99. 10 days ago some stations were up to $3.19, so our prices are on the decline.

[cynicom]

The trust busters of yore knew what they were doing. There were reasons they busted old John D. Rockefeller.

There was no shortage of oil or gas, there was no great demand, there was however a problem. Old John and a few cronies owned and operated the industry from top to bottom and manipulated the industry for maximum gain. There are a lot more players now but they are all of the same mindset as Rockefeller.

[TFMcGuire]

You seem unwilling to consider market factors which drive up the cost of refining and distributing the petroleum products.

The cost of energy to refineries has increased. Additional shifts working at overtime rates. Winter fuel mandates by EPA, cost of fuel to tankers distributing gasoline, increased energy costs to gas stations and their employees.....

Also, The fact that we are having few gas stations running out of fuel is because the economy is limiting consumption by price increase instead of by imposed rationing or actually running out of fuel because of unchanged consumption---itself owing to artificially low prices.

[azhenfud]

http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp

[cynicom]

I refuse to accept that "supply and demand" are in control in the oil business.