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Oil prices tumble 6 days from election Original Source Link: (May no longer be active)
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Crude Oil Falls on Report of Larger-Than-Expected Supply Rise
Oct. 27 (Bloomberg) -- Crude oil futures plunged more than 4 percent in New York, the biggest decline in five months, after an Energy Department report showed that U.S. stockpiles rose more than expected.
Supplies climbed 3.9 million barrels to 283.4 million in the week ended Oct. 22. The 1.4 percent increase was the biggest weekly rise since March. An increase of 1 million barrels was expected, according to the median of forecasts of 15 analysts. Stockpiles of distillate fuel, which include heating oil and diesel, declined more than expected last week.
``This shows that the global supply situation is good and the move higher was overdone,'' said Kyle Cooper, an analyst with Citigroup Inc. in Houston. ``The exporters are producing as much crude as possible.''
Crude oil for December delivery fell $2.67, or 4.8 percent, to $52.50 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange, the biggest decline since June 2. Prices reached $55.67 on Oct. 25, the highest since futures began trading in 1983. Oil futures were 75 percent higher than a year earlier.
In London, the December Brent crude-oil futures contract fell $2.16, or 4.2 percent, to $49.40 a barrel on the International Petroleum Exchange. Brent futures touched $51.95 after the inventory report was released, the highest price since the contract began trading in 1988.
Refineries operated at 89.2 percent of capacity last week, up 1 percentage point, the report showed. Refiners increased their output of gasoline, heating oil, diesel and other fuels.
Gasoline Inventories
Gasoline stockpiles rose 1.3 million barrels last week to 201.2 million, 3.8 percent higher than a year earlier, the department said. Production increased 2.5 percent to 8.9 million barrels a day, the highest since the week ended Aug. 13. Demand for gasoline fell 3.2 percent to 8.9 million barrels a day, the lowest since the week ended July 16.
``Gasoline production is up and demand is lackluster,'' Cooper said. ``Distillate production is also up but homeowners are stocking up.''
Distillate supplies fell 2.4 million barrels, or 2.1 percent, to 116.6 million. A decline of 1 million barrels was expected, according to the median of analyst forecasts. Inventories were 13 percent lower than a year earlier. Heating oil supplies fell 1.3 percent to 48.9 million, leaving stockpiles 16 percent lower than a year earlier.
Heating Oil
``Time is running out to rebuild heating oil supplies before the winter,'' said Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York. ``Even if we have a normal winter there is the potential of shortages given the supply and demand picture.''
Heating oil for November delivery fell 7.41 cents, or 4.7 percent, to $1.494 a gallon in New York. Prices reached $1.603 on Oct. 25, matching the price on Oct. 22, the highest since the fuel began trading in 1978. Gasoline for November delivery fell 7.25 cents, or 5.1 percent, to $1.34 a gallon. Prices reached $1.445 on Oct. 22, the highest since May 28.
Prices have surged because of concern that heating oil supplies will be insufficient to meet demand during the Northern Hemisphere winter.
``How can you justify a price of over $50 if a minor product might be tight in a few months?'' said Michael Lynch, president of Strategic Energy & Economic Research, a consulting firm for oil companies in Winchester, Massachusetts. ``Heating oil is really not that important when you look at global energy consumption.''
Bankruptcy
Higher oil prices have hurt airline profits and helped push some to file for bankruptcy. ATA Holdings Corp. sought bankruptcy protection yesterday. ATA, the 11th-largest U.S. airline in passenger traffic this year, and seven subsidiaries filed to reorganize in U.S. Bankruptcy Court in Indianapolis, where the company is based.
Oil company earnings have risen with crude oil and petroleum product prices. ConocoPhillips, the largest U.S. refiner, said third-quarter profit jumped 54 percent as margins widened on diesel and other fuels and oil prices surged.
BP, Europe's largest oil company, yesterday said third- quarter profit climbed 53 percent to $3.46 billion. Valero Energy Corp., the No. 3 U.S. refiner, said third-quarter net income more than doubled as fuel prices soared.
OPEC's President
OPEC President Purnomo Yusgiantoro said the U.S. should tap the Strategic Petroleum Reserve to lower prices. The acting secretary-general of the Organization of Petroleum Exporting Countries, Maizar Rahman, said yesterday in Moscow that oil prices may surge to $80 a barrel because members of the group have little spare capacity to compensate for supply disruptions.
OPEC is pumping 2 million barrels a day more than its official quota to meet demand, Purnomo said yesterday, adding that the price of oil contains a risk premium of as much as $15 a barrel.
``It's a way for OPEC to say don't blame us,'' Lynch said. ``They know full well that George Bush won't sell any of the SPR except in an emergency.''
U.S. President George W. Bush in November 2001 ordered that the reserve be filled to about 700 million barrels. The Bush administration has agreed to a limited release of oil from the reserve to compensate for shortages after Hurricane Ivan disrupted production.
Democratic presidential candidate John Kerry on Oct. 6 said Bush should suspend deliveries into the SPR until oil prices decline.
To contact the reporter on this story:
Mark Shenk in New York at mshenk1@bloomberg.net.
To contact the editor responsible for this story:
Robert Dieterich at rdieterich@bloomberg.net.
Last Updated: October 27, 2004 14:47 EDT
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