LONDON, July 13: World oil prices fell on Wednesday after the weekly US snapshot showed a drop in crude reserves and a build-up in distillate stocks and while the focus remained on Tropical Storm Emily amidst concerns it could disrupt Gulf of Mexico output.
The International Energy Agency (IEA) meanwhile warned that high oil prices were here to stay in a world of uncertainty over tropical storms and geopolitical factors such as the London bombings.
New York’s main contract, light sweet crude for delivery in August, lost 22 cents to $60.40 per barrel in early deals after closing up $1.70 on Tuesday on storm concerns.
In London, the price of Brent North Sea crude oil for delivery in August shed 26 cents to $58.56 per barrel after ending $1.38 higher on Tuesday.
The Department of Energy (DoE) said US crude oil stocks fell by 3.9 million barrels in the week to July 8 to 321 million barrels, well above average for this time of year. Analysts’ forecast was for a 3.0-million drop.
“The inventory numbers are a reflection of the outcome of Tropical Storm Cindy” that week, said Doug McIntyre, an analyst for the DoE’s Energy Information Administration.
He said the impact of Hurricane Dennis would be seen in next week’s inventory numbers, after the deadly storm forced the evacuation of Gulf of Mexico oil rigs last weekend.
“We know there was a substantial amount of production shut down as a result of Dennis. I imagine there will be a noticeable drop in domestic crude oil production,” McIntyre said.
The DoE said petrol or gasoline stocks dropped strongly by 2.7 million barrels last week to 212.6 million barrels.
And levels of distillate products, used for heating oil and diesel, rose by a higher-than-expected 3.2 million barrels for the week to 120.4 million barrels.
“The market’s reaction has been very muted” to the energy report, Societe General analyst Deborah White noted. “The prices are going to stay healthy because we’re still worried about the production and refinery losses due to the hurricanes.”
The gasoline number was “very bullish” but there was a significant distillate stocks build “for the second week in a row”, she said. “The signal was very strong that gasoline should take over the product leadership.”
Oil workers on Gulf of Mexico facilities have only just begun returning to work after being evacuated on Friday in the face of Dennis.
“The latest threat is posed by Tropical Storm Emily currently brewing over the Caribbean,” Barclays Capital analyst Kevin Norrish said.
The US National Hurricane Centre has said that Tropical Storm Emily has the potential to become a hurricane soon.
Dennis, the first hurricane of this year’s season, killed 62 people in the Caribbean and United States. It mostly spared oil rigs but led to production disruptions as workers were evacuated.
The IEA meanwhile revised down its estimate of 2005 global oil demand to 83.88m barrels per day from 84.30 million bpd forecast a month ago, in its monthly Oil Market Report.—AFP
