Oil prices extend decline below $80 a barrel

Oil prices extend decline below $80 a barrel

Bangkok, 4 October Oil prices fell today in Asia, extending a decline from the previous session that came after an unexpected increase in US crude oil inventories.

Light, sweet crude for November delivery fell 28 cents to $79.66 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The Nymex crude contract fell 11 cents to settle at $79.94 a barrel in 3 October’s floor session.

Crude oil futures have fallen four straight days after trading at near record levels last week.

The weekly inventory report from the US Energy Department’s energy Information Administration was mixed, analysts said.

Crude oil supplies unexpectedly rose in the week ended 28 September. Gasoline and distillate inventories unexpectedly fell.

And while the drop in gasoline supplies is supportive, demand for the fuel is falling, and that will pressure gasoline prices and crude futures down the road, analysts said.

The EIA said in its report that crude supplies rose 1.2 million barrels last week. Analysts surveyed by Dow Jones Newswires, on average, had predicted that inventories fell 400,000 barrels.

One million barrels of that increase were on the West Coast, the EIA said. Oil and gas infrastructure there is isolated from the rest of the country, though, and that might mean shortages elsewhere would support prices.

Gasoline inventories fell 100,000 barrels last week, while supplies of distillates, which include heating oil and diesel fuel, fell 1.2 million barrels. Analysts had expected gasoline inventories to grow 400,000 barrels, and distillate supplies to increase 700,000 barrels.

Refinery utilization rose by 0.6 percentage points to 87.5% of capacity. Analysts had expected an 0.4 percentage point increase.

Oil’s true value is closer to $65 a barrel, said Tim Evans, an analyst at Citigroup Inc. in New York, instead of at the near $80 a barrel or higher range it has been trading.

Many analysts feel oil prices have been driven up by speculative buying, and they argue that the market’s underlying supply and demand fundamentals do not support the record prices of recent weeks.

However, while many analysts expect oil prices to begin a seasonal decline into winter, few are willing to predict when that slide will begin. Oil prices normally drop off every year in the period between the northern summer driving season and the US and European winter.

Heating oil futures fell 0.23 cent to US$2.1764 a gallon (3.8 litres) while gasoline prices were flat at US$1.9959 a gallon. November natural gas futures fell 2.2 cents to $7.255 per 1,000 cubic feet.