LONDON, Sept 29: World oil prices reversed course on Thursday on profit taking, handing back earlier gains made on fears over US refineries, as traders also looked to stronger-than-expected US inventory data from the previous day.
New York’s main contract, light sweet crude for delivery in November, slipped 75 cents to $65.60 per barrel in early trading.
In London, the price of Brent North Sea crude for November delivery declined 67 cents to $63.28 per barrel.
One London-based analyst, who wished to remain anonymous, said that the move lower was due to investment fund selling.
Traders were also absorbing the impact of Wednesday’s energy report from the US Department of Energy.
“It could be a delayed reaction to the statistics that came out on Wednesday,” noted Bache Financial trader Tony Machacek.
“Most of us were looking for a draw down in gasoline stocks and we got builds. These statistics were relatively negative for the market.”
In Wednesday’s energy report, the US Department of Energy (DoE) posted a drop in crude oil inventories of 2.4 million barrels, a sharper decline than the 1.5-million-barrel drawdown expected by analysts.
But gasoline reserves increased by 4.4 million barrels, against market expectations of a drop of two million barrels.
Distillates, used for heating and diesel fuel, fell by 500,000 barrels, against expectations of a decrease of two million.
US refineries operated at 86.7 per cent of capacity in the week to September 23, down from 90.8 per cent the previous week, the DoE added.
Earlier on Thursday, prices rallied as the market focused on US refineries, many of which were struggling to restart production after hurricanes Katrina and Rita in the US Gulf of Mexico.
Along the Gulf Coast, “all crude production is still offline and about 25 per cent of refining capacity is still offline, possibly for a number of weeks”, said Investec analyst Bruce Evers.
With the northern hemisphere winter season approaching, demand for heating fuel was likely to build and the refineries needed to get back into operation.
Ten refineries remained closed on Wednesday in Texas and Lousiana following Rita’s passage, but only one reported “significant” damage, according to the US Energy Information Administration.
Four refineries were still shut down near New Orleans due to destruction caused by Hurricane Katrina.—AFP
