LONDON, 30 June 2005 — World oil prices fell further yesterday as traders digested a surprise rebound in US crude stocks, and after slumping by more than two dollars on profit taking the previous day.
The unexpected increase in energy stockpiles from the US Department of Energy (DoE) helped ease supply tensions that pushed prices to record highs in recent sessions, dealers said.
New York’s main contract, light sweet crude for delivery in August, dipped by $1.00 to $57.20 per barrel in early deals, after closing down $2.34 at $58.20 on Tuesday. In London yesterday, the price of Brent North Sea crude oil for delivery in August lost $1.02 to $56.16 per barrel after diving $2.12 to $57.18 the previous day.
New York futures had hit $60.95 on Monday — the highest level since it was first traded in 1983 — as supply concerns were exacerbated by a weekend election win for the ultra-conservatives in Iran. Brent crude had struck a record $59.59 also on Monday. “It is bearish,” said Societe Generale analyst Deborah White in response to the DoE numbers, adding: “We expected another crude draw and we saw a crude build instead.” Crude oil reserves rose by 1.1 million barrels in the week ending June 24 to 328.5 million barrels, the DoE said.
Gasoline, or petrol, inventories rose 300,000 barrels to 216.2 million in the week. Distillates, used for heating oil and diesel, rose by 1.7 million barrels to 113.2 million.
Analysts’ consensus forecast had been for a slight drop in US crude oil stockpiles, a rise in distillates and no change for gasoline stocks. “It was a surprise because we did not expect to see crude imports at 11.0 million barrels a day — that is the second highest figure ever,” White added. “Gulf Coast crude imports alone this week were up by one million barrels a day: It is OPEC and a recovery in Mexican production” that have supplied the market with “plenty of crude”.
Crude futures had already tumbled by more than $2 on Tuesday a day after surging to new record peaks on concerns that refineries will be unable to provide enough distillates to meet demand in the northern hemisphere winter — particularly from China and the United States.
Meanwhile, International Energy Authority Executive Director Claude Mandil said yesterday that high oil costs cast a shadow over the world economy. Mandil issued a statement saying that high oil prices of about $60 a barrel and “possibly” more, posed “significant” risk to the world economy and growth and that “the poorer the country, the higher the burden”.
Elsewhere, record prices could force China to delay the filling of its strategic reserve indefinitely, officials involved in the project said yesterday. “We won’t be building stockpiles at such high prices,” said Xu Dingming, director general of the energy bureau at the National Development and Reform Commission, told a business conference in Beijing. “Completion of the reserves will still take time,” Xu said.
Similar to the US strategic reserve, Beijing aims to stockpile up to 100 million barrels of crude, equivalent to almost a month’s national consumption. The reserve is part of a plan to ensure the increasingly energy-hungry nation can provide itself with a cushion against possible shocks or interruptions of foreign supplies.
