LONDON, 7 October 2005 — World oil prices sank by over a dollar yesterday, reaching the lowest point for more than two months on evidence that energy demand is cooling in the United States, analysts said. New York’s main contract, light sweet crude for delivery in November, plunged $1.04 to $61.75 per barrel in early trading. At one point yesterday it dropped to $60.70 — the lowest level since Aug. 3. In London, the price of Brent North Sea crude for November delivery plummeted $1.62 to $58.50 per barrel. It earlier hit 58.24, last seen July 28, one month before Hurricane Katrina sent prices to record highs.
“The concern that rising prices are eating into demand, or worse, may have already tilted the global economy toward contraction, is now participants’ focus,” said Fimat analyst John Kilduff. Sucden analyst Sam Tilley added that oil prices were falling “as signs appeared that high fuel prices are cutting US demand for gasoline and distillates.”
Crude futures had begun falling sharply on Tuesday as speculators bailed out on signs the United States might release more emergency stockpiles of crude. They extended losses on Wednesday after the US Department of Energy provided evidence of weaker demand for energy.
The DoE said that US demand for gasoline (petrol) was 2.6 percent lower than a year earlier. Meanwhile, demand for distillates in the world’s biggest consumer of energy has fallen by 3.8 percent.
Falling demand offset declines in US crude inventories. Crude stocks fell by 300,000 barrels to 305.4 million barrels in the week to September 30, the DoE said.
Gasoline inventories dropped 4.3 million barrels to 195.5 million and distillate supplies used for diesel and heating oil dropped 5.6 million barrels to 128 million. The DoE added that US refineries were operating at only 69.8 percent capacity in the week to September 30, against 86.7 percent the previous week, after Hurricane Rita struck the Texas and Louisiana coast on Sept. 24.
US refineries were already struggling with the aftermath of Hurricane Katrina, which swept through the Gulf Coast at the end of August. With the northern hemisphere winter fast approaching, concerns are growing that supplies of products like heating oil could be tight and that may trigger another run-up in crude prices.