oil tumbles $3+ last night
Dec. 1 (Bloomberg) -- Crude oil tumbled more than $3, its biggest decline in three years, after a government report showing an increase in U.S. heating oil inventories spurred expectations of adequate supplies this winter.
Stockpiles of distillate fuels, which include heating oil and diesel, climbed 2 percent to 117.9 million barrels last week, the biggest gain in four months, according to the Energy Department. Refineries operated at 94 percent of their capacity, the highest rate since Hurricane Ivan struck the Gulf Coast in September.
``We finally got the distillate number we were longing for,'' said Marshall Steeves, an analyst at Refco Group Inc. in New York. ``There was a recovery in refinery runs, which led to an increase in distillate stocks that was well above expectations.''
Crude oil for January delivery fell $3.64, or 7.4 percent, to close at $45.49 a barrel on the New York Mercantile Exchange, the lowest since Sept. 16. It was the biggest decline since a drop of $3.96 on Sept. 24, 2001, when prices plunged because of terrorist attacks in the U.S. Oil prices have declined 18 percent from a record of $55.67 on Oct. 25.
Technical traders who try to forecast a market's direction by analyzing patterns in prior price and volume data started selling futures when prices fell below $47.80, the low on Nov. 24, traders said. Prearranged agreements to sell futures at specific prices are known as stop orders.
Technical Trigger
``It's not just the statistics; technical stops were triggered as we moved lower, adding to the decline,'' said Aaron Kildow, a broker at Prudential Securities Inc. in New York. ``There were a lot of stops at around $47.75.''
In London, the January Brent crude-oil futures contract fell $3.20, or 7 percent, to close at $42.31 a barrel on the International Petroleum Exchange, the lowest since Nov. 16. Brent futures reached $51.95 on Oct. 27, the highest since the contract began in 1988.
The rate of refinery operations was the highest since the week ended Sept. 10, the last week before Hurricane Ivan led to the closure of plants in states along the Gulf of Mexico.
Distillate inventories fell for nine-straight weeks following Sept. 10 because of the disruption caused by Ivan. Heating-oil supplies jumped 1 million barrels, or 2.2 percent, to 49.9 million in the latest report.
`A Shock'
``The magnitude of the gain in distillate came as a shock,'' said George Gaspar, an energy analyst with Robert W. Baird & Co. in Milwaukee. ``This is a prelude to what the industry can do if dedicated to solving the distillate problem. The problem can be solved real fast.''
Production of distillate fuel rose 0.6 percent to 4.2 million barrels a day last week, the highest rate since the week ended July 2. The profit from making a barrel of crude oil into heating oil averaged $12.382 last week, up from $4.962 a year earlier.
Crude oil inventories gained 849,000 barrels to 293.3 million, the highest since the week ended Aug. 6. Oil stockpiles have increased 8.9 percent in the last 10 weeks. Supplies were 3.2 percent higher than a year ago, compared with a year-on-year surplus of 1.1 percent a week earlier.
Gasoline stockpiles rose 3 million barrels to 205.7 million, the highest since Aug. 27.
``There is plenty of crude oil and gasoline,'' Steeves said. ``Heating oil is starting to turn around because of the rise in refinery runs and warm weather. It looks like demand will be weak through mid-December because of the slow arrival of winter.''
Warm Weather
Warm weather in the eastern U.S. may help supplies rise further next week. In the period from Dec. 2 through Dec. 8, heating demand in the U.S. Northeast will be 14 percent below normal, according to forecaster Weather Derivatives Inc. of Belton, Missouri. The Northeast is responsible for about 80 percent of residential heating-oil consumption in the U.S.
The U.S. National Weather Service forecast higher-than- normal temperatures in the eastern half of the nation from Dec. 6 through Dec. 10.
Heating oil for January delivery fell 8.9 cents, or 6.3 percent, to $1.3293 a gallon in New York, the lowest close since Nov. 16. Gasoline for January delivery fell 8.34 cents, or 6.5 percent, to $1.2012 a gallon, the lowest close since Sept. 10.
``There is no question that oil coming down is great for the economy,'' said Richard Yamarone, an economist at Argus Research Corp. in New York. ``The rise in oil prices this year has probably taken 0.7 percent off the economic growth rate.''
OPEC Meeting
The Organization of Petroleum Exporting Countries, source of more than a third of the world's oil, is scheduled to meet in Cairo on Dec. 10 to discuss self-imposed production quotas and target prices. The group of 11 producers is pumping the most oil in 25 years to meet surging demand.
OPEC probably boosted output by about 0.7 percent in November to 30.6 million barrels a day, Geneva-based PetroLogistics Ltd. said last week. PetroLogistics assesses supply by tracking oil tankers.
Nigeria, Saudi Arabia and Venezuela favor keeping quotas at current levels in an effort to lower oil prices, said Edmund Daukoru, Nigeria's presidential adviser on oil, Lagos-based ThisDay reported today. Iran, OPEC's second-biggest producer, wants the group to cut output, Daukoru said
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