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Oil drops below US$100 ahead of OPEC meeting
June 7, 2011, Tuesday
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OIL fell below US$100 a barrel yesterday as investors and economists await a key OPEC meeting this week and the government's outlook on US supply and demand.
Benchmark West Texas Intermediate for July delivery lost US$1.21 to settle at US$99.01 per barrel on the New York Mercantile Exchange. Crude has been within a few dollars of the US$100 mark for about a month.
A stronger dollar pushed oil lower yesterday. Oil is priced in dollars and becomes more expensive for buyers with foreign currency as the dollar gets stronger.
TransCanada Corp. also said its Keystone Pipeline was back online after a minor oil spill at a pump station in Kansas. The pipeline delivers a half million barrels of oil per day to the US from Alberta, feeding supplies to the delivery point for benchmark oil in Cushing, Okla. The 1,300-mile (2,080-kilometer) pipeline was taken offline twice in the last month as TransCanada dealt with leaks.
Analysts are looking for clues on what OPEC will do about oil production when the cartel meets Wednesday in Vienna. OPEC ministers could decide to try to push oil prices lower by increasing production. OPEC officials have said that they believe oil prices are too high and threaten global economic recovery.
"You have a lot of money sitting on the sidelines right now ahead of that meeting," analyst Stephen Schork said.
It's unclear how prices would react to more OPEC production. By pumping more oil, OPEC could make up for the loss of exports from Libya that were cut off by unrest that began there in February. That may push prices lower. But experts also point out that boosting production now could make it harder for the cartel to provide more crude later as global demand increases. That could force prices higher in the long run.
"It all depends on if you're taking a short-term or long-term view of things," independent oil analyst Jim Ritterbusch said.
Major oil investors like Goldman Sachs predict that oil prices will rise in the next 18 months as OPEC closes in on its maximum production capacity. The investment bank, which is considered a major player in oil markets, said in a research note yesterday that global oil demand "continues to increase at a fast pace" with consumption rising by about 500,000 barrels per day in April.
Goldman analyst Michele della Vigna noted, however, that global demand growth appeared to slowing, particularly in Japan, where it fell by 357,000 barrels per day in April due to the earthquake and tsunami that hit the country in March. A number of manufacturing plants closed because of the damage.
Della Vigna also said there were signs of slumping demand closer to home. "May is the first month we have seen a possible reaction to demand from oil prices in the US"
The Energy Department will release its monthly short-term energy outlook today and weekly petroleum inventories report tomorrow. The recent trend has been for rising supplies and falling demand.
In other Nymex trading in July contracts, heating oil lost 3.93 cents to settle at US$3.0174 per gallon and gasoline futures gave up 4.32 cents to settle at US$2.9499 per gallon. Natural gas added 12 cents to settle at US$4.827 per 1,000 cubic feet.
In London, Brent crude lost US$1.36 to settle at US$114.48 per barrel on the ICE Futures exchange.
Benchmark West Texas Intermediate for July delivery lost US$1.21 to settle at US$99.01 per barrel on the New York Mercantile Exchange. Crude has been within a few dollars of the US$100 mark for about a month.
A stronger dollar pushed oil lower yesterday. Oil is priced in dollars and becomes more expensive for buyers with foreign currency as the dollar gets stronger.
TransCanada Corp. also said its Keystone Pipeline was back online after a minor oil spill at a pump station in Kansas. The pipeline delivers a half million barrels of oil per day to the US from Alberta, feeding supplies to the delivery point for benchmark oil in Cushing, Okla. The 1,300-mile (2,080-kilometer) pipeline was taken offline twice in the last month as TransCanada dealt with leaks.
Analysts are looking for clues on what OPEC will do about oil production when the cartel meets Wednesday in Vienna. OPEC ministers could decide to try to push oil prices lower by increasing production. OPEC officials have said that they believe oil prices are too high and threaten global economic recovery.
"You have a lot of money sitting on the sidelines right now ahead of that meeting," analyst Stephen Schork said.
It's unclear how prices would react to more OPEC production. By pumping more oil, OPEC could make up for the loss of exports from Libya that were cut off by unrest that began there in February. That may push prices lower. But experts also point out that boosting production now could make it harder for the cartel to provide more crude later as global demand increases. That could force prices higher in the long run.
"It all depends on if you're taking a short-term or long-term view of things," independent oil analyst Jim Ritterbusch said.
Major oil investors like Goldman Sachs predict that oil prices will rise in the next 18 months as OPEC closes in on its maximum production capacity. The investment bank, which is considered a major player in oil markets, said in a research note yesterday that global oil demand "continues to increase at a fast pace" with consumption rising by about 500,000 barrels per day in April.
Goldman analyst Michele della Vigna noted, however, that global demand growth appeared to slowing, particularly in Japan, where it fell by 357,000 barrels per day in April due to the earthquake and tsunami that hit the country in March. A number of manufacturing plants closed because of the damage.
Della Vigna also said there were signs of slumping demand closer to home. "May is the first month we have seen a possible reaction to demand from oil prices in the US"
The Energy Department will release its monthly short-term energy outlook today and weekly petroleum inventories report tomorrow. The recent trend has been for rising supplies and falling demand.
In other Nymex trading in July contracts, heating oil lost 3.93 cents to settle at US$3.0174 per gallon and gasoline futures gave up 4.32 cents to settle at US$2.9499 per gallon. Natural gas added 12 cents to settle at US$4.827 per 1,000 cubic feet.
In London, Brent crude lost US$1.36 to settle at US$114.48 per barrel on the ICE Futures exchange.
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