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Oil Falls for 3rd Day as Supply Rises, Speculators Reverse Bets
Dec. 2 (Bloomberg) -- Crude oil fell for a third day, reaching an 11-week low, as rising U.S. inventories caused speculators to reverse bets that prices would rise.

Higher OPEC output and warm weather in much of the U.S. may boost fuel stockpiles in the weeks ahead. Heating-oil supplies rose 2.2 percent last week, the biggest gain in two months, a government report showed. Traders who forecast a market's direction by analyzing patterns in prior price and volume data started selling futures when support levels were breached.

``It's amazing how quickly sentiment changed,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``U.S. crude-oil inventories and OPEC production have been pointing to lower prices. The only thing the bulls were holding on to was the heating-oil concern and now that is gone.''

Crude oil for January delivery fell $1.94, or 4.3 percent, to $43.55 a barrel at 11:04 a.m. on the New York Mercantile Exchange. Prices fell to $43.15, the lowest since Sept. 16. Oil has declined 22 percent from a record of $55.67 on Oct. 25. Futures are 41 percent higher than a year ago.

``Breaking below $45.25, which was the low on Nov. 15, was key,'' said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. ``Getting past $45 also triggered more selling.''

Oil in New York has tumbled 12 percent in three days. It's the biggest three-day decline since the U.S.-led invasion of Iraq in March 2003. Prices plunged $3.64 yesterday, the biggest decline since a drop of $3.96 on Sept. 24, 2001, when prices plunged because of terrorist attacks in the U.S.

In London, the January Brent crude-oil futures contract fell $2.11, or 5 percent, to $40.20 a barrel on the International Petroleum Exchange. Brent futures have declined 23 percent since reaching $51.95 on Oct. 27, the highest since the contract began in 1988.

More Selling

``The next target is $40. We could easily see another day like yesterday,'' Silliere said. ``An avalanche doesn't stop half- way down the mountain.''

Concern about possible cuts in supply from Iraq, Russia and Nigeria spurred hedge-fund managers and other large speculators to enter the oil market, pushing prices to records this year.

``The funds are jumping out of every position,'' said Marshall Steeves, an analyst at Refco Group Inc. in New York. ``Prices keep breaking support levels, propelling the downward momentum.''

Company Stocks Drop

Oil-company stocks followed futures lower. A gauge of energy stocks fell 2.3 percent, the steepest decline among 24 industry groups in the S&P 500. Exxon Mobil Corp., the world's biggest publicly traded oil company, fell 95 cents, or 1.9 percent, to $50.20 in New York Stock Exchange composite trading. ConocoPhillips, the largest U.S. oil refinery, fell $3.35, or 3.8 percent, to $85.93.

In the period from Dec. 3 through Dec. 9, heating demand in the U.S. Northeast will be 15 percent below normal, according to forecaster Weather Derivatives Inc. of Belton, Missouri. The Northeast is responsible for about 80 percent of residential heating-oil consumption in the U.S.

Stockpiles of distillate fuels, which include heating oil and diesel, climbed 2 percent to 117.9 million barrels last week, the biggest gain in four months, according to an Energy Department report yesterday. Distillate inventories fell for nine-straight weeks following Sept. 10 because of the closure of refineries and reduced imports caused by Hurricane Ivan.

Warm Weather

``We're supposed to have warm weather in the Northeast,'' Mueller said. ``From a fundamental standpoint there is no reason why we can't fall further.''

Heating oil for January delivery fell 5.63 cents, or 4.2 percent, to $1.273 a gallon in New York. Gasoline for January delivery fell 4.87 cents, or 4.1 percent, to $1.172 a gallon.

Crude oil prices were also pulled lower by plunging prices for natural gas, a competing fuel. From 5 to 10 percent of U.S. factories can burn either natural gas or petroleum products, depending on which is more economical.

The Energy Department revised a natural-gas inventory report that last week showed a bigger-than-expected drop in storage. Gas inventories in the week ended Nov. 19 fell by 17 billion cubic feet, 65 percent less than the 49 billion initially reported, the department said.

Natural gas for January delivery fell 58.3 cents, or 7.9 percent, to $6.83 per million British thermal units on the New York Mercantile Exchange.

The Organization of Petroleum Exporting Countries will meet in Cairo Dec. 10 to discuss its self-imposed production quotas and target prices. Delegates from Indonesia and Nigeria said today they expect the group to keep its limit on output at 27 million barrels a day excluding Iraq, which has no quota.

Production by all 11 OPEC members reached 30.61 million barrels a day in October, according to a Bloomberg survey of oil companies, producers and analysts. It was the most oil OPEC has pumped since November 1979, U.S. Energy Department figures show.



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: December 2, 2004 11:22 EST

Crude Oil Plunges More Than $3 on Jump in U.S. Fuel Inventories

Dec. 1 (Bloomberg) -- Crude oil tumbled more than $3, its biggest decline in three years, after a government report showing an increase in U.S. heating oil inventories spurred expectations of adequate supplies this winter.

Stockpiles of distillate fuels, which include heating oil and diesel, climbed 2 percent to 117.9 million barrels last week, the biggest gain in four months, according to the Energy Department. Refineries operated at 94 percent of their capacity, the highest rate since Hurricane Ivan struck the Gulf Coast in September.

Last Updated: December 1, 2004 15:58 EST

Oil Falls on Larger-Than-Expected Gain in U.S. Fuel Supplies

Dec. 1 (Bloomberg) -- Crude oil tumbled more than $2 a barrel on a report showing that inventories of heating oil and other fuels rose more than expected as refineries operated at the highest rate since a hurricane hit the U.S. in September.

Supplies of distillate fuels, which include heating oil and diesel, climbed 2.3 million barrels to 117.9 million last week, the Energy Department report showed. An increase of 1.5 million was expected, according to the median forecast among 15 analysts surveyed by Bloomberg. Refineries used 94 percent of their capacity, a 1.1 percentage point increase.

``We finally got the distillate number we were longing for,'' said Marshall Steeves, an analyst at Refco Group Inc. in New York. ``There was a recovery in refinery runs, which led to an increase in distillate stocks that was well above expectations.''

Crude oil for January delivery fell $2.23, or 4.5 percent, to $46.90 a barrel at 12:36 p.m. on the New York Mercantile Exchange. Oil prices have declined 16 percent from a record of $55.67 on Oct. 25. Futures are 57 percent higher than a year ago.

Technical traders who try to forecast a market's direction by analyzing patterns in prior price and volume data started selling futures when futures fell below $47.80, the low on Nov. 24, traders said. Prearranged orders to sell futures at specific prices, known as stop orders, were triggered as prices moved lower.

Trigger

``It's not just the statistics; technical stops were triggered as we moved lower, adding to the decline,'' said Aaron Kildow, a broker at Prudential Securities Inc. in New York. ``There were a lot of stops at around $47.75.''

In London, the January Brent crude-oil futures contract fell $2.36, or 5.2 percent, to $43.15 a barrel on the International Petroleum Exchange. Brent futures reached $51.95 on Oct. 27, the highest since the contract began in 1988.

The rate of refinery operations was the highest since the week ended Sept. 10, the last week before Hurricane Ivan led to the closure of plants in states along the Gulf of Mexico.

Distillate inventories fell for nine-straight weeks following Sept. 10 because of the disruption caused by Ivan. Heating-oil supplies jumped 1 million barrels, or 2.2 percent, to 49.9 million. Supplies along the East Coast rose 855,000 barrels, or 2.9 percent, to 30.8 million.

Crude oil inventories gained 849,000 barrels to 293.3 million, the highest since the week ended Aug. 6. Oil stockpiles have increased 8.9 percent in the last 10 weeks. Supplies were 3.2 percent higher than a year ago, compared with a year-on-year surplus of 1.1 percent a week earlier. Gasoline stockpiles rose 3 million barrels to 205.7 million, the highest since Aug. 27.

`Plenty of Crude'

``There is plenty of crude oil and gasoline,'' Steeves said. ``Heating oil is starting to turn around because of the rise in refinery runs and warm weather. It looks like demand will be weak through mid-December because of the slow arrival of winter.''

Warm weather in the eastern U.S. may help supplies rise further next week. In the period from Dec. 2 through Dec. 8, heating demand in the U.S. Northeast will be 14 percent below normal, according to forecaster Weather Derivatives Inc. of Belton, Missouri. The Northeast is responsible for about 80 percent of residential heating-oil consumption in the U.S.

The U.S. National Weather Service forecast higher-than- normal temperatures in the eastern half of the nation from Dec. 6 through Dec. 10.

Heating oil for January delivery fell 6.43 cents, or 4.5 percent, to $1.354 a gallon in New York. Gasoline for January delivery fell 6.16 cents, or 4.8 percent, to $1.223 a gallon.

OPEC Meeting

The Organization of Petroleum Exporting Countries is scheduled to meet in Cairo on Dec. 10 to discuss self-imposed production quotas and target prices. The group of 11 producers is pumping the most oil in 25 years to meet surging demand.

Nigeria, Saudi Arabia and Venezuela favor keeping quotas at current levels in an effort to lower oil prices, said Edmund Daukoru, Nigeria's presidential adviser on oil, Lagos-based ThisDay reported today. Iran, OPEC's second-biggest producer, wants the group to cut output, Daukoru said.