Oil’s date with $100 postponed
Oil’s rise to $100 a barrel, which seemed inevitable as recently as two days ago, was placed on indefinite hold Wednesday after a U.S. government report showed that crude stockpiles fell less than expected last week, easing supply concerns in the world’s top consumer.
The decline extended losses that have chopped $7 off oil prices since Friday on expectations that the Organization of the Petroleum Exporting Countries may increase output and signs that U.S. demand growth is easing because of wider economic problems.
U.S. oil settled $3.80 lower at $90.62 a barrel in the biggest loss since Aug. 6. It was also the biggest nominal drop in crude prices since September 2001, when oil was trading at just over $20 a barrel.
Wednesday’s decline followed Tuesday’s drop of $3.28 a barrel, making for crude’s second-largest two-day price decline since the New York Mercantile Exchange introduced futures contracts in 1983. On Oct. 19 and 22, 1990, crude prices dropped $8.42.
U.S. crude inventories fell 400,000 barrels last week, less than half of what analysts had expected, as imports offset higher demand from the nation’s refineries, the U.S. Energy Information Administration said.
Crude stockpiles in Cushing, Okla., the delivery point for U.S. crude futures, rose 600,000 barrels over the same period, according to the EIA. Those supplies are closely watched by traders as a benchmark of oil inventory tightness.
Analysts said the report could alleviate some concerns about consumer supplies ahead of winter, which had helped send oil to a record above $99 a barrel last week. Anemic growth in demand and a jump in refinery activity also weighed on prices, which have dropped sharply in recent days on concerns about the economy and expectations that supplies will grow.
Oil prices surged from below $70 a barrel in August to near $100 on a weaker U.S. dollar, a rush of speculative investment and worries that supplies might be stretched to meet demand during the winter.
“The report . . . added to the bearish sentiment in the market,” said Eric Wittenauer, an energy analyst at A.G. Edwards & Sons Inc. in St. Louis. “It comes at a period in time when OPEC is boosting production . . . and considering another increase in production.”
Although analysts caution that futures could still rebound and again threaten to reach $100 this year, most believe that’s becoming less likely. Many market observers have long argued that prices have been driven higher by speculators and have predicted that futures would fall sharply at some point.
