HOUSTON, Dec. 28 -- Crude prices continued to fall for the fourth consecutive trading session because of warm weather, down Dec. 27 to the lowest level for a front-month in more than a month on the New York market.
"Expectations are that crude inventories may have dropped because of shipping delays encountered in the past week. The consensus calls for crude oil inventories to drop by 2.1 million bbl, and overall petroleum inventories to drop by 1 million bbl," said analysts in the Houston office of Raymond James & Associates Inc.
Shortly after that report, however, the Energy Information Administration said Dec. 28 that commercial US crude inventories fell by 8.1 million bbl to 321 million bbl during the week ended Dec. 22. Gasoline stocks surged by 3 million bbl to 203.9 million bbl in the same period. Distillate fuel inventories increased by 500,000 bbl to 133.6 million bbl, with a build in diesel surpassing a decrease in heating oil.
Imports of crude into the US increased by 227,000 b/d to 9.1 million b/d during the same week. Input of crude into US refineries was up by 82,000 b/d to 15.6 million b/d, with refineries operating at 90.9% of capacity. Gasoline production increased slightly to 9.4 million b/d, while distillate fuel production increased to 4.3 million b/d.
"Market sentiment has been driven primarily by mild East Coast weather recently. However, we suggest that the impact is being overdone, given that heating oil is normally just 6% of US demand at this time of year, and last year proved to be less affected by weather than is normally assumed," said Paul Horsnell at Barclays Capital Inc., London.
"The average price of front-month [crude contract on the New York market] in 2006 is headed for about $66.25/bbl, a 17% rise on 2005 and not much of a major deceleration from the increases of 20%, 32%, and 37% experienced in 2003, 2004, and 2005, respectively," Horsnell said. "However, oil prices are ending the year relatively weakly, with the value of the Organization of Petroleum Exporting Countries' basket currently lower in dollar terms than it was at the start of the fourth quarter. Further, in euro terms the value of the basket is currently only a little above its low for the quarter."
The February contract for benchmark US sweet, light crudes lost 76¢ to $60.34/bbl Dec. 27 on the New York Mercantile Exchange. The March position retreated by 67¢ to $61.56/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was down 76¢ to $60.35/bbl. Heating oil for January delivery lost 1.45¢ to $1.61/gal on NYMEX. Unleaded gasoline for the same month, however, gained 1.53¢ to $1.59/gal.
The January natural gas contract fell 27.5¢ to $5.84/MMbtu on NYMEX, the lowest level for a front-month gas contract in more than 12 weeks. On the US spot market, natural gas at Henry Hub, La., lost 23¢ to $5.53/MMbtu.
In London, the February IPE contract for North Sea Brent crude dropped 58¢ to $60.52/bbl. Gas oil for January gained $5.50 to $524.75/tonne.
The average price for OPEC's basket of 11 benchmark crudes fell by $1.02 to $56.43/bbl on Dec. 27.
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