Oil prices slip on US stocks data

AFP
LONDON
Petroleumworld.com 01 12 06

World oil prices slid on Wednesday as the market digested bigger-than-expected gains in gasoline and distillates stockpiles in the United States.

Traders continued to track developments in the oil-rich Middle East, in particular the escalating crisis surrounding Iran's nuclear program, dealers said.

New York's main contract, light sweet crude for delivery in February, dipped 12 cents to 63.25 dollars per barrel in pit trading.

In London, the price of Brent North Sea crude for February delivery shed 26 cents to 61.66 dollars per barrel in electronic dealing.

The Department of Energy said Wednesday that gasoline (petrol) stocks went up 4.5 million barrels to 208.8 million for the week ended January 6, far more than the expected 1.6 million barrels.

The market focus is traditionally on distillates in the northern hemisphere winter, during which heating fuel demand normally peaks.

However, milder-than-expected weather has placed the focus back on gasoline reserves, which are some 4.1 percent below the same stage last year.

"There was a strong fall in demand for gasoline, as is usually the case at the beginning of the year, because people are returning from holidays and travel less," said an analyst at a European bank who wished to remain anonymous.

Gasoline stocks should therefore improve in the coming weeks, the analyst added. The winter months usually allow time for refiners time to build up gasoline stockpiles.

The DoE added that distillate stocks, used to make heating oil and diesel fuel, rose 4.9 million barrels to 133.8 million.

Market watchers had forecast a much smaller increase in distillates of some 2.2 million barrels, but recent temperate winter weather has curbed US demand for heating oil.

Stocks of heating fuel are now some 12.7 percent higher than at the same stage last year.

Crude inventories, meanwhile, fell 2.9 million barrels to total 318.7 million. Oil traders had expected a smaller drop of 600,000 barrels, owing to increased refinery activity.

Prices had surged to three-month highs on Monday, hitting 64.61 dollars in New York and 63.21 dollars in London, before profit-taking set in.

Speculative funds have poured into the market in recent weeks, seeking to reap returns on worries over Russian energy supplies and instability in Middle East.

According to some dealers, Iran's decision to resume nuclear research activities after a two-year suspension is likely to push oil prices higher in the long-term, given the wider concerns it provokes about the situation in the region.

Meanwhile, Israeli Prime Minister Ariel Sharon's grave medical condition was seen as a key factor creating uncertainty in the market.

 

AFP 01/11/06

Copyright © 2006 AFP. All rights reserved

 

 

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