LONDON, 16 November 2004 — Oil prices plunged to the lowest level for almost two months yesterday, sinking below $46 in New York as winter supply fears receded and the Nigerian government moved to avert a strike threat.
New York’s main oil contract, light sweet crude for delivery in December, fell to as low as $45.60 a barrel, the lowest level since Sept. 20. US crude oil futures were showing a loss of almost four percent from Friday’s close and about 18 percent in under a month.
At about 1630 GMT the US contract stood at $46.05, down $1.27 on the day.
Brent North Sea crude for December delivery tumbled by $1.76 to $40.55 a barrel in London, the lowest level since Sept. 15.
The Nigerian government made an 11th-hour bid to avert a general strike, ordering a temporary increase in fuel subsidies and an immediate cut in pump prices on the eve of a threatened nationwide protest.
Nigerian unions yesterday suspended a general strike due to start today after the government agreed to reduce domestic fuel prices, a union leader said. “We have decided... to suspend the strike,” said Nigeria Labor Congress President Adams Oshiomhole.
Unions decided to call off the action at an emergency meeting yesterday night held after the government agreed to reduce gasoline prices by 8 percent to 49 naira per liter. Unions had demanded a 20 percent cut.
Previous strikes have not disrupted Nigeria’s daily output of some 2.5 million barrels. Oil prices have fallen by almost $10 a barrel from an all-time of $55.33 seen in New York on Oct. 18, as rising US crude oil stockpiles in the United States calm markets’ fears of a winter supply crunch in the northern hemisphere. “Oil prices are down, still following the trend of last week after the crude inventory build in the US,” said Commerzbank analyst David Thomas. “The fact that funds have been liquidating their long positions ... is a sign that people believe oil prices are going to be dropping,” he added.
US government data released Wednesday showed that crude oil inventories had increased by 1.8 million barrels to 291.5 million in the week to Nov. 5, helping to offset a further drop in stockpiles of heating oil.
This week’s snapshot of US commercial crude oil inventories, due to be released on Wednesday, would likely show another increase in stockpiles, analysts said.
“We are seeing good production volumes coming through and imports rising into the US, so crude inventories should continue rebuilding,” said Thomas.
“The main issue remains the heating oil inventories being down again, but it seems that the crude market has pretty well ignored that for the time being.”
Data last week showed that US heating oil inventories are 17 percent below 2003 levels, noted analysts at the Sucden brokerage firm.
“However a rebound in crude stocks in the US has brought oil prices down from their peaks thanks partly to the highest OPEC production in decades,” they wrote in a note to clients. Meanwhile in Iraq saboteurs blew up a section of an oil pipeline in the northern region of Kirkuk early yesterday, while flames raged in four oil wells after a string of bombings the previous day, officials said.
The secondary pipeline carrying oil to refineries in the city of Baiji was bombed at around 3:00 am (0000 GMT) about 60 kilometers (37 miles) west of Kirkuk, said police officer Sahim Mohammed.