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Oil falls despite drop in supply

OIL prices fell yesterday as traders shrugged off an unexpected drop in crude stockpiles and focused instead on government data that showed Americans still have little appetite for more petroleum.

Benchmark crude for November delivery lost US$1.31 to settle at US$69.57 on the New York Mercantile Exchange. In London, Brent crude gave up US$1.36 to settle at US$67.20 on the ICE Futures exchange.

Prices fell immediately after the Energy Information Administration reported that the nation's oil supply dropped by 1 million barrels last week. The drop was unexpected - analysts thought stockpiles would grow by 1.9 million barrels - but investors found little else to like in the report.

Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said crude demand continues to be unimpressive, noting that the U.S. still has more oil in storage than last year.

American petroleum consumption has cooled so much that Sunoco, Inc. announced Tuesday that it would idle its Eagle Point refinery in Westville, New Jersey. As part of the decision, Sunoco said it would furlough 400 workers and cut its dividend.

"Most people look at Sunoco and wonder, who else is going to shut down until things improve?" Kloza said.

The EIA report also said that total petroleum supplies grew last week. Gasoline inventories grew by 2.9 million barrels last week and distillate fuel supplies grew by 700,000 barrels. Analysts expected smaller increases for both.

Elsewhere, the dollar got stronger compared with other major currencies, and equities markets lost ground in afternoon trading. Oil, which is traded in dollars, tends to fall when the dollar gets stronger.

In other Nymex trading, gasoline for November delivery lost 5.24 cents to settle at US$1.7203 per gallon, and heating oil gave up 3.31 cents to settle at US$1.7811 a gallon. Natural gas for November delivery added 2.4 cents to settle at US$4.904 per 1,000 cubic feet.


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