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Oil back above $58
Thursday, February 16, 2006
Oil prices rose back above $58 a barrel Thursday after a steep drop the previous day when OPEC said energy demand was weakening and the U.S. government said its domestic supplies of petroleum were rising.
Light, sweet crude for March delivery on the New York Mercantile Exchange rose 66 cents to $58.31 a barrel in electronic trading by midday in Europe. The contract had fallen by almost $2 a barrel on Wednesday.
Brent crude futures rose 50 cents to $58.65 on the ICE Futures exchange in London.
Gasoline rose more than 3 cents to $1.4175 a gallon while heating oil rose a 1.5 cents to $1.6236 a gallon. Natural gas increased 13 cents to $7.200 per 1,000 cubic feet.
Until the rebound Thursday, crude futures had plunged by more than $4 since the start of the week, settling below $58 a barrel on Wednesday for the first time in nearly two months.
“The recent falls have breached so many technical barriers, that it is hard to see where the new support level is. But we see very limited further downside for crude,” said Lin Hui, senior analyst at China International Futures.
Oil market concerns about Iran, OPEC's No. 2 producer, have dissipated somewhat but have not entirely disappeared, and analysts say the mid-winter price drop could easily be followed by an early spring rally.
Barclays Capital said in a report that although the twin issues of Iran's nuclear ambitions and violence in Nigeria are temporarily off investors' minds, there is increasing pessimism that these situations will be resolved diplomatically.
In its weekly petroleum supply report, the U.S. Energy Department said crude oil inventories grew last week by 4.9 million barrels to 325.6 million barrels, or 11 per cent higher than a year ago. Gasoline inventories increased by 2.2 million barrels to 225.5 million barrels, or 2 per cent above year ago levels. The supply of distillate fuel, which includes diesel and heating oil, rose by 900,000 barrels to 136.9 million barrels, or 14 per cent than last year.
The agency's report said gasoline demand over the past four weeks was 1.8 per cent higher than a year ago, while jet fuel demand over the same period was close to 1 per cent higher.
Tobin Gorey at Commonwealth Bank of Australia noted that the build in gasoline stocks has raised the safety buffer for any potential supply disruption, and believes talk of an OPEC quota cut is just a dollar or two more away.
The Organization of Petroleum Exporting Countries said Wednesday that crude oil demand will grow at a slower pace this year as uncertainties remain over economic growth in the U.S. and Asia.
In its monthly market report, OPEC trimmed 2006 global oil demand to 84.64 million barrels a day and slightly lowered its demand growth forecast for the year to 1.57 million barrels a day.