Crude Oil Falls


Crude oil fell to the lowest in almost four weeks after OPEC said demand will drop this year and U.S. supplies rose as the recession cut fuel use.

Consumption of OPEC supplies will shrink 4.2 percent to 29.5 million barrels a day, according to a monthly report released today. The discount of oil in New York to the Brent grade in London widened to as much as $10.79 a barrel today, a record, because of rising supplies at Cushing, Oklahoma, the delivery point for barrels traded on the U.S. exchange.

Crude oil for February delivery fell $1.83, or 5 percent, to $35.40 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $33.20, the lowest since Dec. 19. Prices are down 62 percent from a year ago.

Brent crude oil for February settlement declined 55 cents, or 1.2 percent, to $44.53 a barrel on London’s ICE Futures Europe exchange. The more-active March Brent contract rose 1 cent to $47.63 a barrel.

Crude-oil inventories at Cushing, Oklahoma, where the West Texas Intermediate traded on the Nymex is stored, climbed 2.5 percent to 33 million barrels last week, the Energy Department said yesterday. It was the highest since at least April 2004, when the department began keeping records for the location.

The price of oil for delivery next December is 64 percent higher than for the front-month contract, allowing traders to profit if they can store crude. February 2009 crude is trading at a $7.86 discount to March, from $3.88 on Jan. 5. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango.

The Organization of Petroleum Exporting Countries shaved its global demand estimate for 2009 by 20,000 barrels to 85.66 million barrels a day. That brings this year’s reduction to 180,000 barrels a day, or 0.2 percent.

There will be a major contraction” in demand among members of the Organization for Economic Cooperation and Development, with the United States being the main contributor,” to this reduction, the OPEC said.

U.S. fuel demand fell 6 percent last year, the biggest drop since 1980, as prices touched records and the economy contracted, the industry-funded American Petroleum Institute said today.

U.S. crude stockpiles increased 1.14 million barrels to 326.6 million barrels last week, the highest since Aug. 31, 2007, the Energy Department said yesterday. Gasoline and distillate fuel supplies also rose.

Morgan Stanley is seeking a supertanker to store crude oil, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from higher prices later in the year, four shipbrokers said. Frontline Ltd., the world’s biggest owner of supertankers, yesterday said about 80 million barrels of crude oil is being stored in tankers, the most in 20 years.

OPEC agreed to a record 9 percent cut in supply targets at a Dec. 17 meeting to reverse the plunge in oil prices, which have dropped more than $100 a barrel in New York in the past six months. This week Saudi Arabia, the world’s biggest oil producer, said it will curb output by more than was announced at the December summit.

 


TradingEconomics.com, Bloomberg
1/15/2009 1:04:59 PM