Oil trades near two-month low
Oil traded near a two-month low in New York after the government reported that US crude production climbed to the highest level in more than 15 years while fuel consumption decreased.
Futures fluctuated after dropping 4.1 per cent yesterday, the most since June, following an Energy Department report that output rose by 11,000 barrels a day to 6.52 million last week, the most since December 1996. Fuel demand fell 0.3 per cent to 18.3 million barrels a day in the four weeks ended Sept. 28, the lowest level since April. Crude and distillate stockpiles declined as gasoline supplies increased.
“The market just believes that there is too much supply, and when it doesn’t have the economic activity to back it up, generally the price must go down,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney, who sees prices as low as $US82 a barrel if inventories don’t shrink and the global economy doesn’t improve. “We don’t have the economic activity that should send prices higher.”
Crude for November delivery was at $US87.99 a barrel, down 15 cents, on the New York Mercantile Exchange. It earlier fell as much as 26 cents, or 0.2 per cent. Futures dropped $US3.75 yesterday to close at $US88.14, the lowest level since Aug. 2. Prices are down 11 per cent this year.
Brent oil for November settlement was down 3 cents after dropping $US3.40, or 3.1 per cent, to end yesterday’s session at $US108.17 a barrel on the London-based ICE Futures Europe exchange, the lowest close since Aug. 2. The European benchmark crude was at a premium of $US20.20 to the New York-traded West Texas Intermediate grade, up from $US20.03 yesterday.
Oil’s decline in New York is stalling as a technical indicator shows futures are dropping too quickly for further losses to be sustained, according to data compiled by Bloomberg. The 14-day relative strength index is at 33.1, the lowest since June 28. A reading below 30 indicates prices are oversold. Crude has chart support at $US87.79 a barrel. That’s the lower of two so-called leading span lines that define an “ichimoku cloud,” an area where buy orders may be clustered.
Crude supplies rose 8.4 per cent last week from a year earlier, the Energy Department said yesterday. Stockpiles dropped by 482,000 barrels from the previous week to 364.7 million barrels. Inventories were forecast to increase 1.5 million barrels, according to the median of 11 analyst estimates in a Bloomberg survey.
Imports of crude increased by 511,000 barrels a day to 8.11 million in the week ended Sept. 28. Shipments have arrived at an average rate of 8.84 million barrels a day this year. Stockpiles at Cushing, Oklahoma, the delivery point for WTI, rose 135,000 barrels to 43.9 million last week, the first gain in four weeks.
Highest since 1996
America met 83 per cent of its energy needs in the first six months of the year, thanks to new technologies that enable drillers to tap crude trapped in shale formations. If the trend continues through 2012, it will be the highest level since 1991.
A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Texas and Oklahoma. North Dakota’s output rose 26 per cent this year through July, according to the department.
The same technology unleashed a boom in natural gas output that propelled supplies to a record last year and sent prices to a decade low of $US1.907 per million British thermal units in April.
Enbridge Inc. plans to build an oil pipeline to transport Bakken crude east in an effort to avoid a bottleneck at Cushing, the company said yesterday.
Dubbed “Sandpiper,” the line would carry as much as 200,000 barrels a day from the Bakken formation in North Dakota to Superior, Wisconsin, and eventually to refineries in eastern Canada, Stephen Wuori, the head of the company’s liquids pipelines business, said at an investor conference in Toronto.