LONDON, 11 November 2005 — World oil prices dropped heavily yesterday after a jump in US crude inventories signaled that demand for energy was cooling, analysts said.
The International Energy Agency followed up the data by shaving its forecast for oil demand growth in 2005 and 2006, though this was having little impact on prices, they added.
New York’s main contract, light sweet crude for delivery in December, shed 98 cents to $57.90 per barrel in pit deals. In London, the price of Brent North Sea crude for December delivery dived $1.26 to $55.64 per barrel in electronic trading.
By yesterday, crude oil futures in New York had fallen by more than 18 percent since reaching a record high of $70.85 on Aug. 30. That was the day after Hurricane Katrina struck the southern United States and severely damaged major oil installations in the Gulf of Mexico.
Prices meanwhile slid yesterday despite suicide bomb attacks in Jordan that killed 56 people.
“Normally, market reaction to an event like yesterday’s explosions in Amman would have caused prices to rise as a result of heightened concern over the security of oil supplies” in the Middle East region, Fimat analyst Mike Fitzpatrick said.
The US Department of Energy (DoE) on Wednesday said that crude stockpiles rose for the fifth week, by 4.5 million barrels to 323.6 million in the seven days ending Nov. 4. Motor gasoline, or petrol, stocks climbed 4.2 million barrels to 201.1 million barrels.
Prices were lower “after a US government report showed a surprisingly large increase in crude supply, increasing concerns that demand is faltering”, Sucden analyst Sam Tilley said.
French bank Societe Generale added: “Unexpectedly-massive stock builds in both crude and gasoline stocks first struck the eye in this week’s figures... in short, hurricane-hammered product stocks are rebuilding amazingly fast.”
The DoE data showed also that distillate supplies, which include diesel and heating fuel, fell by 100,000 barrels to 120.8 million last week, as refineries worked on producing more gasoline.
Unusually mild weather ahead of the northern hemisphere winter meant that providing distillates had become less of a priority for refineries.
Markets meanwhile digested news from the IEA, which said it was revising down its forecast for growth of global oil demand this year by 70,000 barrels per day to 1.20 million barrels per day and for next year by 90,000 barrels per day to 1.66 million barrels.
“In terms of the IEA, it was fairly benign,” Investec analyst Bruce Evers said. “The adjustment to the 20O5 demand forecast is largely weather related and the small downward adjustment to 2006 was largely the ongoing impact of the hurricanes,” he added.