Oil prices lower as market discounts risk factors
By Antoine Agasse
AFP
NEW YORK
Petroleumworld.com 02 09 06
World oil prices fell Wednesday to their lowest level in weeks
as markets discounted the risks of a cutoff of oil supplies from
Iran and reacted to generally strong US inventory levels.
New York's main contract, light sweet crude for delivery in March,
fell 54 cents to close at 62.55 dollars per barrel.
In London, the price of Brent North Sea crude for March delivery
slid 50 cents to 61.06 dollars per barrel in closing deals.
The latest declines pushed prices down to their lowest levels
since early January.
Prices had tumbled about three percent Tuesday as supply concerns
eased over Iran's controversial nuclear energy program.
The downward trend continued "as the market started to feel
increasingly comfortable that there are sufficient inventories
to compensate for any potential production losses from Iran,"
said BMO Nesbitt Burns analyst Bart Melek.
"We agree with the market in this instance, as we see the
fundamentals supporting a significantly lower oil price and no
significant reduction in Iranian production," the analyst
said.
Even if the United Nations imposes sanctions, Melek said he expected
that any such move "would no doubt keep oil from Iran flowing
in order to get China (who holds a veto and imports 10 percent
of its oil from Iran) to agree."
Mike Fitzpatrick at Fimat USA said he was not yet ready to throw
in the towel on oil prices.
He said now "is probably a good a time as any to see a reversal
of the last several sessions of corrective action."
He added that "upside price risk associated with any of several
geopolitical situations will be with us for some time to come."
US inventory levels appeared plentiful despite a small drop in
crude oil reserves.
The US Department of Energy (DoE) said in Wednesday's weekly snapshot
of crude inventories that gasoline or petrol inventories jumped
4.3 million barrels to 223.3 million in the week to February 3.
That was more than double analysts' consensus forecasts of a 1.9-million-barrel
build. As a result, gasoline supplies in the United States are
now 1.7 percent above their level at the same stage last year.
"It is the gasoline number which is weighing on the market"
and causing prices to sag, noted Societe Generale analyst Alexandre
Kervinio.
The DoE also reported a drop in crude oil inventories of 300,000
barrels to a level of 320.7 million barrels.
That contrasted with market expectations of a rise of 700,000
barrels.
But the agency noted that crude reserves were 10.7 percent above
the levels at the same time last year.
Reserves of distillates, used for heating and diesel fuel, dipped
300,000 barrels to 136 million, according to the DoE, compared
with a market forecast of a rise of 150,000 barrels.
Nonetheless, distillate supplies are 12.4 percent above last year's
levels.
Oil prices gained almost nine percent in January on strong fund
buying and rising geopolitical tensions, mainly in Iran and Nigeria,
who together account for approximately eight percent of global
crude oil production.
Crude futures hit 69.20 dollars in New York on January 23 but
have since declined, also owing to mild weather during the northern
hemisphere winter.
New York prices had hit a historic high point of 70.85 dollars
in August 2005 after Hurricane Katrina devastated energy infrastructure
in the US Gulf of Mexico.
AFP
02/08/06
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