Oil Falls Further As Supply Worries Ease; Nymex Crude Above US$80 a Barrel
( AP ) -- Oil prices continued to drop Tuesday after the easing of concerns about supply disruption in the Gulf of Mexico, but with analysts saying expectations of tighter supplies ahead still may limit the decline
Light, sweet crude for November delivery fell 58 cents to US$80.37 a barrel in Asian electronic trading on the New York Mercantile Exchange by midmorning in Singapore.
The decline was a continuation of the overnight trend which saw the contract fall 67 cents a barrel to settle at US$80.95 a barrel, said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.
"The U.S. production in the Gulf of Mexico is coming back on-stream so that's taken some of the heat out of the oil price," Moore said. A tropical depression developing in the Gulf helped push crude oil futures to record levels above US$83 a barrel last week as oil companies evacuated oil platforms and shut in production.
The weather system dissipated over the weekend without damaging key oil and gas infrastructure in the area and production has been coming back on-line.
Some investors were trying to determine if oil futures' recent record-setting advance above US$80 a barrel had run its course.
Many analysts believe much of oil's recent run can be attributed to speculators buying and selling crude futures contracts with no intention of taking delivery. That speculative frenzy was heightened last week when the Federal Reserve cut interest rates. Falling interest rates have driven the dollar lower against other global currencies, which makes commodities priced in dollars cheaper for overseas investors.
Oil prices were expected to remain volatile ahead of a midweek U.S. petroleum inventory report forecast to show tighter crude supplies in the world's largest energy consumer.
"The oil price looking forward can still be fairly bumpy. A lot will depend on economic information and oil market information," Moore said, adding that the market will be watching closely Wednesday's release of U.S. fuel stocks data.
U.S. crude oil stocks are expected to have fallen 2 million barrels, on average, for the fifth-straight week in the week ended Sept. 21, according to a Dow Jones Newswires survey of analysts.
Inventories of distillates, which include heating oil and jet fuel, are tipped to have risen 1.1 million barrels while gasoline inventories are expected to have gained about 100,000 barrels. Refinery use is expected to have dropped 0.7 percentage point to 88.8 percent of capacity.
In London, November Brent crude lost 67 cents to US$78.24 a barrel on the ICE futures exchange.
Heating oil futures lost 1.15 cents to US$2.2191 a gallon (3.8 liters) while gasoline prices dropped 1.54 cents to US$2.068 a gallon. Natural gas futures inched up 0.4 cent to US$6.374 per 1,000 cubic feet.