Oil Stockpiles Exceed Predictions; Prices Slip
Oil prices slipped again Wednesday, losing ground after a report that U.S. crude inventories were much higher than analysts had predicted.
Brent grade oil from the North Sea was trading at $18.50 a barrel for delivery in February, down $1.50 from late Tuesday. A barrel is the equivalent of 42 gallons.
On the New York Mercantile Exchange, West Texas Intermediate, the major U.S. crude, closed at $19.66 a barrel in contracts for March delivery, down from Tuesday’s $20.17 close.
Prices for heating oil and gasoline also were lower.
Stocks Increase
In figures released late Tuesday, the American Petroleum Institute said U.S. refinery stocks grew by more than 7 million barrels in the week ended Jan. 24. The trade group also said supplies of gasoline were slightly higher while heating oil supplies were unchanged during that period.
The crude figure was much higher than an expected figure of about 2 million barrels, indicating weaker-than-expected demand by refiners.
“Traders took that as awful bearish,” said Andrew Lebow, an analyst with Shearson Lehman Bros.
As a result, Wednesday’s prices opened much lower--down nearly $1.95 in European trading for February Brent futures and 57 cents lower for March futures of West Texas Intermediate on the New York Mercantile Exchange.
Lebow said traders were also discouraged by Tuesday’s market performance, where prices lost about half of the strong gains they had made on Monday, when both major crude grades broke back into levels above $20 a barrel for the first time in several days.
“We could be in a market where neutral-to-bearish news is interpreted as very bearish,” he said.
February Pacts Down
In other New York trading, February contracts for heating oil closed at 59.62 cents a gallon, down from 60.63 on Tuesday. Unleaded gasoline closed at 59.37 cents a gallon, down from Tuesday’s 62.70 cents, and regular gasoline fell to 58.21 cents a gallon, off from 61.05.
As futures prices have declined, many oil companies have been cutting the prices they will pay for immediate delivery of domestic crude oil.
On Wednesday, Marathon Oil, a unit of U.S. Steel, said it was reducing its posted prices for various grades of oil by 50 cents to $1, including a $1 cut to $23.50 a barrel for West Texas Intermediate.
Since late November, oil prices have been falling amid slack demand and excess world supplies generated by both the Organization of Petroleum Exporting Countries and non-OPEC producers such as Great Britain, Norway and Mexico.
