MARKET WATCH: Oil prices retreat on economic worries

Oct. 31, 2008
Energy prices retreated Oct. 30 upon worries that a decline in the economy worldwide could curb petroleum demand.

Paula Dittrick
Senior Staff Writer

HOUSTON, Oct. 31 -- Energy prices retreated Oct. 30 upon worries that a decline in the economy worldwide could curb petroleum demand.

"Oil markets seem to be pricing for a deep and long recession that will derail (crude oil) demand growth this year and next," said Jan Stuart, UBS analyst. "Acute tightening or freezing of credit markets across the globe has wreaked havoc on trade flows, including those of oil."

UBS reduced its oil price forecasts for 2009-10. Analysts now expect benchmark US sweet light crudes will average $60/bbl in 2009 compared with an earlier forecast of $105/bbl. For 2010, they expect crude oil to recover modestly to average $75/bbl.

The US Commerce Department said gross domestic product contracted in the third quarter to the lowest quarterly figure since the third quarter of 2001. For the most recent quarter, GDP fell at a seasonally adjusted 0.3%/year rate between July and September.

The US Energy Information Administration reported US oil use in August was the lowest since December 2001, down 8.4% from the same period a year ago.

Meanwhile, Iran plans to cut 199,000 b/d of its oil production starting Oct. 31, reported the state-run news service IRNA. This follows an Oct. 24 decision by the Organization of Petroleum Exporting Countries to cut production by 1.5 million b/d.

Energy prices
Trading for the December contract for benchmark US sweet, light crudes on the New York Mercantile Exchange (NYMEX) closed Oct. 30 at $65.96/bbl, down $1.54 for the day. The January contract dipped $1.45 to $66.54/bbl.

On the US spot market, West Texas Intermediate at Cushing, Okla., dropped to $65.96/bbl from $68.70/bbl in the previous session.

Heating oil for November delivery was down 1.69¢ to $1.98/gal on NYMEX. The November contract for reformulated blend stock for oxygenate blending (RBOB) dropped 6.60¢ to $1.467/gal.

Natural gas for the same month settled at $6.431/MMbtu, down 3.47¢, on NYMEX. On the US spot market, gas at Henry Hub, La., rose 15¢ to $6.72/MMbtu.

In London, the December IPE contract for North Sea Brent crude dropped $1.76 to $63.71/bbl. The November gas oil contract declined $29 to $628.75/tonne.

The average price for OPEC's basket of 13 reference crudes increased $1.79 to $59.92/bbl Oct. 30.

Contact Paula Dittrick at [email protected].