Market watch: Oil prices drop on inventory report

By the OGJ Online Staff

HOUSTON, Mar. 29�Energy futures fell sharply on the New York Mercantile Exchange and international markets Wednesday based on inventory reports showing US crude supply at its highest level in nearly a year.

Benchmark US light, sweet crude for May delivery declined by $1.44 to settle at $26.31/bbl on the NYMEX while the June contract dropped $1.35 to settle at $26.49/bbl.

The US Energy Information Administration Wednesday reported crude stocks grew 11.2 million bbl to 301.5 million bbl. This reinforced the American Petroleum Institute�s Tuesday report showing US crude inventories at 302.6 million bbl for the week ending Mar. 23.

Traders said both reports were unexpectedly bearish, leading to downward pressure on energy prices. The April home heating oil contract lost 2.87� to settle at 75.07�/gal, while unleaded gasoline for April declined 2.93� to end at 91.02�/gal. Both the API and the EIA showed gasoline inventories are well below their year-ago levels going into the summer driving season.

Natural gas for April lost 23.7� to settle at $5.38/Mcf. Robert Morris, an analyst with Salomon Smith Barney in New York, said temperatures across the US last week were 31% colder than last year and 15% colder than the 10-year average.

In London, the May contract for North Sea Brent crude futures on the International Petroleum Exchange settled at $25.27/bbl, down 62� from the previous close. The day�s high was $25.95 and the low was $25.25. On the IPE, the April natural gas contract closed at the equivalent of $3.41/Mcf, down 2�.

The average price for OPEC�s basket of seven crudes declined 28� to settle at $23.49/bbl.