Crude Oil Falls Near a Three-Month Low as U.S. Stockpiles Grow
May 16 (Bloomberg) -- Crude oil fell close to a three-month low on expectations U.S. refiners could make enough gasoline for summer and growth in demand would slow in China.
U.S. crude stockpiles have increased 14 of 18 weeks so far this year, reaching their highest level since 1999. OPEC, the source of about 40 percent of the world's oil, is pumping almost as much as it can so supplies will accumulate, easing concern production will be strained in the second half of the year.
``Stocks have been building because OPEC has been responding to higher prices,'' said John Waterlow, an oil analyst at Wood Mackenzie Consultants Ltd. in Edinburgh. ``There's evidence that long-lasting high prices are finally having an impact on demand.'' Prices may have peaked for this year, he said.
Crude oil for June fell as much as 73 cents, or 1.5 percent, to $47.94 a barrel on the New York Mercantile Exchange and was down 55 cents at 12:40 p.m. London time. It has dropped about $10 from a record $58.28 on April 4. Earlier today, oil was within 19 cents of a three-month low set three days ago.
Brent crude for June settlement fell 62 cents, or 1.3 percent, at $48.04 on London's International Petroleum Exchange.
More oil is on the way. The Organization of Petroleum Exporting Countries' tanker loadings are scheduled to rise 0.9 percent in the four weeks ending May 28, compared with the previous four weeks, the consulting company Oil Movements said May 13. The total is 24.5 million barrels a day, 230,000 a day more than in the prior period, the consultant said.
``Prices are falling on the combination of the inventory position in the U.S. and expectations of slower global economic growth,'' said Jonathan Copus, an analyst at Investec Henderson Crosthwaite in London. ``Only evidence that gasoline demand is eating into U.S. inventories and evidence of a continued surge in demand'' could make prices rebound.
U.S. Demand
Gasoline demand in the U.S. peaks between Memorial Day, in two weeks, and Labor Day in early September. Supplies in the week ended May 6 were 3.2 percent larger than the seasonal average for the past five years, the U.S. Energy Department said. Crude stockpiles exceeded their average by 6.5 percent.
The International Energy Agency, an adviser to 26 industrialized nations on energy, last week cut its forecast for China's oil demand growth this year to 7.4 percent, compared with growth of 16 percent last year. The University of Michigan said on May 13 that U.S. consumer sentiment unexpectedly fell in May as gasoline prices increased.
OPEC raised its production quotas on March 16, marking a change in its policy of reducing output in the second quarter, when demand is usually lower. The organization is pumping more oil to help meet world consumption, Adnan Shihab-Eldin, the group's secretary general, said in Kuwait yesterday.
Pumping Hard
The group of 11 oil producers is pumping more than 30 million barrels a day, Shihab-Eldin said, out of the 32.2 million a day Bloomberg data estimates it can produce. That capacity will rise to about 32.7 million barrels a day by the end of the year, Shihab-Eldin said.
Last week, the IEA reduced by 100,000 barrels a day its forecast for how much oil OPEC would need to supply to meet demand in the fourth quarter. Expectations the U.S. would consume less diesel and China import less oil led the IEA to make the change.
Hedge-fund managers and other large speculators are almost evenly split on whether crude prices will rise or fall, according to U.S. Commodity Futures Trading Commission data for the week ended May 10.
Speculative long positions, or bets prices will rise, declined for a fifth week on Nymex, falling by 8,318 contracts, to outnumber short positions by just 85 contracts at that date, their lowest since mid-December. They reached a record high of 88,712 in early April.
China's Imports
China's oil imports jumped 22.5 percent to 12.3 million metric tons last month, compared with an increase of 23 percent in March, according to the Beijing-based Customs General Administration of China. So far this year, imports have climbed 4.4 percent to 41.9 million tons.
Imports to China, the world's second-largest consumer after the U.S., ``are consistent with demand growth'' expectations of 10 percent growth in demand in 2005, Kevin Norrish, an analyst at Barclays Capital in London, said in a note. ``There are a growing number of rumors suggesting a very sharp drop in Venezuelan crude oil production in recent months.''
Venezuela's oil output, suspect since the strike that shut down the world's fifth-largest exporter more than two years ago, may be more than 200,000 barrels per day lower than analysts' estimates. The country's production has fallen to about 2.3 million barrels a day, said Julio Montoya, an opposition member on the assembly's energy commission, citing a new study by the commission. By comparison, the U.S. Energy Department said May 10 that April output was 2.5 million barrels a day.
``Prices should continue above $40 a barrel,'' Jose Sergio Gabrielli, the chief financial officer of Petroleo Brasileiro SA, Brazil's state-run oil company, said in an interview today. ``We don't see any dramatic decline in prices. Prices should be in the range above $40, closer to $50.''
To contact the reporter on this story:
Alejandro Barbajosa in London at abarbajosa@bloomberg.net
Last Updated: May 16, 2005 08:05 EDT |
