Warm Weather Forecasts Push Crude Prices Lower
Oil prices settled below $60 a barrel for the first time in three months Monday, as forecasts calling for warmer weather sparked a wave of selling.
Earlier in the month, the market had moved lower on signs of weakening gasoline demand after a summertime jump in pump prices.
Light sweet crude for December fell $1.46 to settle at $59.76 a barrel on the New York Mercantile Exchange, the lowest close since July 28.
In other Nymex trading, natural gas futures declined 85 cents to settle at $12.205 per 1,000 cubic feet.
“The market has been spooked by warm weather,” said analyst Phil Flynn of Alaron Trading Corp. in Chicago.
Flynn and others are paying particularly close attention to the weather in the Northeast and Midwest as a determinant of demand for home-heating fuels such as natural gas and heating oil. If the weather is warmer than usual, that will give much-needed breathing room to producers in the Gulf of Mexico that are still recovering from hurricanes Katrina and Rita.
Flynn warned that “the market is still very concerned about tight supplies and it won’t take much to change the momentum.”
BNP Paribas Commodity Futures broker Tom Bentz said oil prices might have further to fall over the next couple of weeks. He said he would not be surprised to see the $55-a-barrel level tested.
“The mood is still pretty bearish,” he said. “It doesn’t look like we’ve found a bottom.”
Traders have been concerned since September about reductions to oil-production and refining capacity along the Gulf Coast in the aftermath of Katrina and Rita.
The U.S. Minerals Management Service on Monday said 68% of daily oil production and 54% of natural-gas production in the Gulf of Mexico remained off-line, slightly lower than Thursday.
Ken Hasegawa of Tokyo-based brokerage firm Himawari expects crude to trade in the narrow range of $60 to $62 a barrel in the days ahead because of a lack of decisive news in the market.
“Weather forecasts and the heating oil demand outlook in the U.S. may be the factors that can offer near-term price direction for crude oil,” Hasegawa said.
