Market watch: Oil futures prices fall as traders ignore low inventories

Oil futures prices continued to decline Wednesday on the New York Mercantile Exchange as traders ignored bullish reports of record-low US crude inventories.

By OGJ editors

HOUSTON, Oct. 10 -- Oil futures prices continued to decline Wednesday on the New York Mercantile Exchange as traders ignored bullish reports of record-low US crude inventories.

The US Department of Energy reported early Wednesday that US oil stocks fell by 4.7 million bbl last week as Hurricane Lili curtailed production of oil and natural gas from the central Gulf of Mexico and disrupted oil imports. The American Petroleum Institute late Tuesday put the draw at a more conservative 2.59 million bbl.

But instead of reacting to those bullish indicators, traders are still chipping away at the so-called war premium that was built into oil futures prices in recent months, analysts said.

The war premium stems from market concerns that possible military action by the US against Iraq might disrupt Middle East oil supplies. Various estimates previously put that premium at $2-4/bbl above the "normal" price for the near-month contract on benchmark US crudes.

Traders apparently see less risk now of imminent military action, partly because US inventories currently may be too low to chance further supply losses.

The November contract for benchmark US sweet, light crudes dropped 13¢ to $29.35/bbl Wednesday on NYMEX, while the December position was down 6¢ to $29.45/bbl.

Unleaded gasoline for November delivery lost 0.31¢ to 82.04¢/gal. Heating oil for the same month gained 0.37¢ to 79.42¢/gal, however.

The November natural gas contract climbed 5.6¢ to $3.92/Mcf "on the strength of a new forecast of an early cold winter and an expected low weekly storage report," reported analysts at Enerfax Daily.

The US Energy Information Administration reported gas injections into US underground storage dropped to 42 bcf last week as Hurricane Lili disrupted offshore production. That was down from injections of 47 bcf the previous week when Tropical Storm Isidore blew through that same area and 73 bcf during the same period in 2001. US gas storage now totals nearly 3.1 tcf.

In London, futures prices for North Sea Brent oil were slightly firmer on the International Petroleum Exchange. The November contract moved up 6¢ to $28.15/bbl. The November natural gas contract jumped 9.6¢ to the equivalent of $3.22/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries dipped 7¢ to 27.91/bbl Wednesday.


More in General Interest