LONDON, 23 December 2004 — World oil prices dived yesterday after an unexpected rise in US commercial crude inventories eased fears about low stockpiles during the northern hemisphere winter. New York’s main contract, light sweet crude for delivery in February, fell $1.66 to $44.10 a barrel in early trading. The contract fell to as low as $43.65 soon after the inventory figures were published. In London, Brent North Sea crude for February lost $1.57 to $40.80 in late deals.
The huge drop in prices “are a little bit surprising because the stats are not all that bearish”, Financial Bache trader Christopher Bellew said. “I guess people had widely anticipated a drop in stocks but still we have got stocks for distillates much lower than the five-year average,” he added.
US crude oil inventories rose 2.1 million barrels to 295.9 million in the week ending Dec. 17, the Department of Energy said, defying expectations of a decline. Distillates — mostly heating fuel and diesel - rose 600,000 barrels to 119.9 million, surprising analysts who had predicted a drop. Heating fuel stockpiles were flat at 49.9 million. Gasoline inventories surged 1.8 million barrels to 211.4 million.
The latest US Energy Department report came as the United States braced itself for possibly more severe winter weather, particularly in the northeast region, which accounts for 80 percent of the country’s total heating oil consumption. “The market remains nervous about the adequacy of fuel inventories, given that US heating oil stocks are already about 13 percent below year-ago levels,” analysts at the Sucden brokerage firm said. Elsewhere, traders digested news that an oil pipeline feeding the Iraqi refinery at Baiji in northern Iraq has been repaired after being sabotaged on Monday. The pipeline at Fatha, about 200 kilometers (153 miles) north of Baghdad, has been fixed, an Oil Ministry official said. Officials reported on Tuesday that a grid of intersecting export and domestic oil pipelines in northern Iraq was on fire, belching black smoke and shooting out bright red flames.Iraq meanwhile hopes to produce 3.5 million barrels of oil a day by the end of 2005, Iraqi Finance Minister Adil Abd Al-Mahdi said during a visit to Washington on Tuesday. “Actual production of oil depends on pipelines, if they are functioning or not,” Mahdi said, adding that “we could achieve 2.5 million (barrels) of production per day and we expect to reach 3.5 million, maybe by the end of 2005”.