Crude Oil Plunges as Fuel Needs Drop With End of Summer Driving
Sept. 2 (Bloomberg) -- Crude oil futures in New York plunged, for their biggest decline in five months, on speculation refiners will buy less as the end of summer cuts motorist fuel needs.
U.S. gasoline demand peaks between Memorial Day in May and yesterday's Labor Day holiday. Consumption rose to a record during the week ended Aug. 22 and inventories fell, according to the Energy Department. That kept New York crude oil prices above $30 a barrel and pushed retail gasoline prices to a record.
``The plug has been pulled,'' said Tim Evans, an analyst with IFR Pegasus in New York. ``We're now trading October gasoline, which we have a lot of time to trade. Demand for gasoline should slacken.''
Crude oil for October delivery fell $1.79, or 5.7 percent, to $29.78 a barrel at 12:45 p.m. on the New York Mercantile Exchange. A close near this level would be the first below $30 since July 23 and the biggest daily loss since March 18.
Gasoline for October delivery dropped 5.77 cents, or 6.2 percent, to 87.05 cents a gallon on the Nymex. The last day of trading in the September contract was Friday. Gasoline futures prices have declined 22 percent since Aug. 25. Heating oil was down 4.13 cents, or 5 percent, at 78.50 cents a gallon.
Crude oil's decline accelerated after prices fell below $31.10 a barrel, last Wednesday's low, triggering sell orders from fund managers who base decisions on charts and graphs of futures prices and trading volumes.
``When prices broke key resistance at $31.10, sell stops were triggered,'' said Ed Silliere, vice president of risk management for Energy Merchant LLC in New York. ``We then broke through resistance at $30.10. The next big resistance level is all the way down at $29.17,'' which was reached on July 23.
`Shift in View'
In London, the October Brent crude-oil futures contract dropped $1.35, or 4.6 percent, to $27.90 a barrel on the International Petroleum Exchange.
``There is a lot of selling by the funds,'' Evans said. ``The size of the drop is evidence that there has been a shift in their view of the market.''
Speculators are getting out of ``long'' positions, which are bets on a rise in prices. Long positions held by non-commercial traders, including hedge funds and other large speculators, outnumbered ``shorts'' by 60,025 contracts as of Aug. 5, according data from the Commodity Futures Trading Commission. That was the biggest net long position since 1999.
``The commodity funds got caught betting that prices would rise and are now selling,'' said Phil Flynn, a senior energy trader with Alaron Trading Corp. in Chicago.
Gasoline
U.S. gasoline demand averaged 9.668 million barrels a day in the week ended August 22, a government report showed. Demand over the four weeks ending on the same date averaged 9.419 million barrels, up 1.6 percent from the same period in 2002.
Supplies of gasoline fell 5.7 million barrels to 191.2 million, the lowest since November 2000, last week's inventory report showed. U.S. oil reserves dropped 200,000 barrels to 278.6 million barrels during the week ended August 22.
While U.S. heating oil inventories are 21 percent lower than a year ago, they have been rising. That has eased concern that demand will outstrip supply when the weather turns colder, causing a run-up in prices.
Refiners will shift some production from gasoline to heating oil in coming weeks, and the amount of crude they process typically falls in September and October as they do maintenance work.
Iraq
``It will take a while before attention shifts to the low supplies of heating oil, so prices should move towards $28, the bottom end of our recent range,'' said David Becker, manager of energy derivatives trading for Citibank NA in New York.
The Nymex crude oil contract nearest expiration hasn't been below $28 since May.
The Department of Energy's weekly report on crude oil and petroleum product inventories is due for release Thursday at 10:30 a.m. in Washington. The report is being delayed from its usual Wednesday release because Monday was a holiday.
Prices have been supported by the slower-than-expected return of oil exports from Iraq. Looting, sabotage and erratic electricity have limited Iraqi oil output. Iraq exported about 400,000 barrels a day in July, down from 1.74 million February, before U.S.-led forces occupied the country, according to Bloomberg estimates.
Two U.S. military police officers were killed and another injured when their vehicle hit a bomb south of the Iraqi capital of Baghdad, the military said. In a separate incident, car bombings in the city injured 10 people, mostly Iraqi police.
Sept. 2 (Bloomberg) -- Crude oil futures in New York plunged, for their biggest decline in five months, on speculation refiners will buy less as the end of summer cuts motorist fuel needs.
U.S. gasoline demand peaks between Memorial Day in May and yesterday's Labor Day holiday. Consumption rose to a record during the week ended Aug. 22 and inventories fell, according to the Energy Department. That kept New York crude oil prices above $30 a barrel and pushed retail gasoline prices to a record.
``The plug has been pulled,'' said Tim Evans, an analyst with IFR Pegasus in New York. ``We're now trading October gasoline, which we have a lot of time to trade. Demand for gasoline should slacken.''
Crude oil for October delivery fell $1.79, or 5.7 percent, to $29.78 a barrel at 12:45 p.m. on the New York Mercantile Exchange. A close near this level would be the first below $30 since July 23 and the biggest daily loss since March 18.
Gasoline for October delivery dropped 5.77 cents, or 6.2 percent, to 87.05 cents a gallon on the Nymex. The last day of trading in the September contract was Friday. Gasoline futures prices have declined 22 percent since Aug. 25. Heating oil was down 4.13 cents, or 5 percent, at 78.50 cents a gallon.
Crude oil's decline accelerated after prices fell below $31.10 a barrel, last Wednesday's low, triggering sell orders from fund managers who base decisions on charts and graphs of futures prices and trading volumes.
``When prices broke key resistance at $31.10, sell stops were triggered,'' said Ed Silliere, vice president of risk management for Energy Merchant LLC in New York. ``We then broke through resistance at $30.10. The next big resistance level is all the way down at $29.17,'' which was reached on July 23.
`Shift in View'
In London, the October Brent crude-oil futures contract dropped $1.35, or 4.6 percent, to $27.90 a barrel on the International Petroleum Exchange.
``There is a lot of selling by the funds,'' Evans said. ``The size of the drop is evidence that there has been a shift in their view of the market.''
Speculators are getting out of ``long'' positions, which are bets on a rise in prices. Long positions held by non-commercial traders, including hedge funds and other large speculators, outnumbered ``shorts'' by 60,025 contracts as of Aug. 5, according data from the Commodity Futures Trading Commission. That was the biggest net long position since 1999.
``The commodity funds got caught betting that prices would rise and are now selling,'' said Phil Flynn, a senior energy trader with Alaron Trading Corp. in Chicago.
Gasoline
U.S. gasoline demand averaged 9.668 million barrels a day in the week ended August 22, a government report showed. Demand over the four weeks ending on the same date averaged 9.419 million barrels, up 1.6 percent from the same period in 2002.
Supplies of gasoline fell 5.7 million barrels to 191.2 million, the lowest since November 2000, last week's inventory report showed. U.S. oil reserves dropped 200,000 barrels to 278.6 million barrels during the week ended August 22.
While U.S. heating oil inventories are 21 percent lower than a year ago, they have been rising. That has eased concern that demand will outstrip supply when the weather turns colder, causing a run-up in prices.
Refiners will shift some production from gasoline to heating oil in coming weeks, and the amount of crude they process typically falls in September and October as they do maintenance work.
Iraq
``It will take a while before attention shifts to the low supplies of heating oil, so prices should move towards $28, the bottom end of our recent range,'' said David Becker, manager of energy derivatives trading for Citibank NA in New York.
The Nymex crude oil contract nearest expiration hasn't been below $28 since May.
The Department of Energy's weekly report on crude oil and petroleum product inventories is due for release Thursday at 10:30 a.m. in Washington. The report is being delayed from its usual Wednesday release because Monday was a holiday.
Prices have been supported by the slower-than-expected return of oil exports from Iraq. Looting, sabotage and erratic electricity have limited Iraqi oil output. Iraq exported about 400,000 barrels a day in July, down from 1.74 million February, before U.S.-led forces occupied the country, according to Bloomberg estimates.
Two U.S. military police officers were killed and another injured when their vehicle hit a bomb south of the Iraqi capital of Baghdad, the military said. In a separate incident, car bombings in the city injured 10 people, mostly Iraqi police.
