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Oil prices tumble after shock rise in US gasoline stocks
By Antoine Agasse
AFP
NEW YORK
Petroleumworld.com 08 24 06
Oil prices plummeted Wednesday on news of a surprise increase in US gasoline reserves, and following calls by Iran for talks to resolve its nuclear standoff.
New York's main contract, light sweet crude for delivery in October, sank 1.34 dollars to close at 71.76 dollars a barrel.
In London, Brent North Sea crude for October delivery plunged 1.22 dollars to 72.02 dollars a barrel.
US gasoline stocks showed a surprise gain of 400,000 barrels in the week to August 18, rising to 205.8 million barrels, the Department of Energy said in a weekly report. Analysts had anticipated a decline of more than two million.
The increase was achieved despite robust demand for petrol with many Americans on the roads for summer vacations.
It came also despite the shutdown of about half of output at the gigantic Prudhoe Bay oil field in Alaska, where British energy BP is scrambling to overhaul its pipelines after one sprang a leak.
Crude oil inventories, meanwhile, fell by 600,000 barrels to 330.4 million barrels last week. That was much less than the drop of 1.35 million barrels forecast by analysts.
"The data is bearish (for prices). The draw in crude oil was less than forecast and the build in gasoline was not only unexpected, given that a build was forecast, but also contra-seasonal," AG Edwards analyst Bill O'Grady said.
In its weekly analysis, the DoE said that US motorists may have seen the worst of a long, hot summer of sky-high gasoline prices.
"With children starting the return to school in parts of the country, the realization that summer is just about over is hard to ignore," it said.
"For US petroleum product markets, that means a shift in focus from gasoline to heating oil and diesel fuel.
"With most of August behind us and with gasoline inventories in the upper half of the average range .... market participants feel reasonably sure that gasoline supplies are ample, absent any major disruption over the next several days."
Inventories of distillate fuel products such as diesel and heating oil increased by 2.3 million barrels to 135.5 million barrels, the DoE added.
Higher gasoline imports and ramped-up US production helped cancel out the effects of the Prudhoe Bay shutdown, according to Societe Generale analyst Deborah White.
"It shows that the US and the rest of the world have changed their attitude in order to avoid a shortage after Prudhoe Bay. The market was completely shocked by the adjustment," she said.
Traders were also weighing up the situation in Iran, the world's fourth-biggest producer of crude oil.
Iran on Tuesday delivered its response to a US-backed package of incentives aimed at ending a crisis over its nuclear activities. It called for further talks on the issue, but did not say if it had met UN Security Council demands.
The US State Department said that Iran's response "falls short" of UN conditions to avoid sanctions, which could be imposed unless it halts uranium enrichment by August 31.
Iran pumps about 4.0 million barrels of oil per day of which around 2.7 million barrels are exported, and analysts argue that vital supplies could be affected if sanctions are imposed on the Islamic republic.
"What we do know is that there was no offer from Tehran to suspend uranium enrichment and that the full text will be studied by all parties," BMO Nesbitt Burns analyst Bart Melek said.
"We also know that there will be extensive political maneuvering around this issue by Iran, the UN, US, China and Russia for months to come, making price volatility a mainstay of the oil market in the months to come," he said.
AFP 23 2017 GMT 08 06
Copyright ©2006 AFP. All Rights Reserved.
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