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Oil prices fall on concerns about growing supplies
Source: Agencies |
January 7, 2011, Friday
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OIL prices fell 2 percent yesterday, erasing more than two weeks of gains on concerns that supplies will increase in coming weeks as demand for oil and gas remains soft.
Benchmark crude for February delivery lost US$1.92 to settle at US$88.38 a barrel on the New York Mercantile Exchange.
Oil prices have surged for more than a month, hitting a two-year high of US$92.58 per barrel earlier this week. Traders though are concerned that supplies have been growing in Cushing, Oklahoma, key delivery point for benchmark crude. Supplies also should rise elsewhere as refineries order more imported oil to replenish their inventories, said Andrew Lebow, senior vice president and broker at MF Global. Refineries slowed imports at the end of the year to reduce supplies on hand and cut their tax bills.
With oil supplies expected to grow, traders see little reason to buy at higher prices.
"Every talking head has been predicting US$100 oil" in coming months, Lebow said. But with frigid weather expected throughout the country this month, drivers are more likely to keep their cars off the road, slowing demand for gas and oil, he said.
Weather forecasters said a blast of Arctic air should drop temperatures across the U.S. next week. Accuweather.com said January could be the coldest month since 1985. From Jan. 10 to 20, Chicago and Denver could see temperatures below zero Fahrenheit. New York may only see highs in the teens F, and southern cities could stay below freezing.
The winter chill, combined with a government report showing a bigger-than-expected drop in supplies sent natural gas prices sharply higher yesterday morning. They were up more than 2 percent to US$4.62 per 1,000 cubic feet on the Nymex. Prices tumbled by the afternoon, however, as investors locked in profits. Natural gas settled about 4 cents lower at US$4.43 per 1,000 cubic feet.
The dollar rose as a Labor Department report on jobless claims pointed to moderate job growth, and retailers reported the strongest increase in holiday sales since 2006. PFGBest analyst Phil Flynn said that oil prices have been propped up in recent months by federal stimulus programs, but "if we continue to get data like this, we're not going to need any more" stimulus plans.
Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude contracts more expensive for investors holding foreign currency.
In other Nymex trading for February contracts, heating oil fell 3.1 cents to settle at US$2.51 per gallon, while gasoline futures dropped less than a penny to settle at US$2.44 per gallon.
In London, Brent crude fell 98 cents to settle at US$94.52 per barrel on the ICE Futures Exchange.
Benchmark crude for February delivery lost US$1.92 to settle at US$88.38 a barrel on the New York Mercantile Exchange.
Oil prices have surged for more than a month, hitting a two-year high of US$92.58 per barrel earlier this week. Traders though are concerned that supplies have been growing in Cushing, Oklahoma, key delivery point for benchmark crude. Supplies also should rise elsewhere as refineries order more imported oil to replenish their inventories, said Andrew Lebow, senior vice president and broker at MF Global. Refineries slowed imports at the end of the year to reduce supplies on hand and cut their tax bills.
With oil supplies expected to grow, traders see little reason to buy at higher prices.
"Every talking head has been predicting US$100 oil" in coming months, Lebow said. But with frigid weather expected throughout the country this month, drivers are more likely to keep their cars off the road, slowing demand for gas and oil, he said.
Weather forecasters said a blast of Arctic air should drop temperatures across the U.S. next week. Accuweather.com said January could be the coldest month since 1985. From Jan. 10 to 20, Chicago and Denver could see temperatures below zero Fahrenheit. New York may only see highs in the teens F, and southern cities could stay below freezing.
The winter chill, combined with a government report showing a bigger-than-expected drop in supplies sent natural gas prices sharply higher yesterday morning. They were up more than 2 percent to US$4.62 per 1,000 cubic feet on the Nymex. Prices tumbled by the afternoon, however, as investors locked in profits. Natural gas settled about 4 cents lower at US$4.43 per 1,000 cubic feet.
The dollar rose as a Labor Department report on jobless claims pointed to moderate job growth, and retailers reported the strongest increase in holiday sales since 2006. PFGBest analyst Phil Flynn said that oil prices have been propped up in recent months by federal stimulus programs, but "if we continue to get data like this, we're not going to need any more" stimulus plans.
Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude contracts more expensive for investors holding foreign currency.
In other Nymex trading for February contracts, heating oil fell 3.1 cents to settle at US$2.51 per gallon, while gasoline futures dropped less than a penny to settle at US$2.44 per gallon.
In London, Brent crude fell 98 cents to settle at US$94.52 per barrel on the ICE Futures Exchange.
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