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Oil drops as US data signal lower demand
LONDON — Oil dropped yesterday after US inventory data showed that high oil prices were continuing to prompt consumers to cut back on fuel use.
The US stock data showed a 5.6 million-barrel build in crude stocks, sharply up on the forecast 2.0 million-barrel build. Distillates declined by 1.9 million barrels, nearly matching expectations.
Demand for oil product was down 3.2 per cent from a year ago.
US crude CLc1 was down $1.10 to $62.10 by 1400GMT, after losses of $1.16 on Tuesday. London Brent crude LCOc1 was off 89 cents at $58.39.
Adding pressure to prices, Hurricane Wilma appeared to steer away from vulnerable rigs and refineries in the Gulf of Mexico.
US refineries are gradually resuming normal operations after August and September’s storms. Five plants are still shut along with two thirds of Gulf of Mexico oil output.
“We maintain our general view that these markets have to be given some respect given the fact that we still have sizeable outages going into Q4,” said Edward Meir at Man Financial.
OPEC has been pumping near full tilt to fill the supply gap and the cartel expects to boost its production capacity to 38 million bpd by 2010 from 32.5 million bpd this year, its acting Secretary General Adnan Shihab Eldin said.
Tensions with OPEC’s second biggest producer Iran mounted. Diplomatic and industry sources said Iran was blocking British and South Korean goods in an apparent attempt to force the two to drop their opposition to Tehran’s nuclear programme.
Oil and gas exports have not been affected.
Analysts say there is little OPEC can do to tame prices, which have risen 50 per cent this year and are still within sight of August’s $70.85 record high. The head of the International Monetary Fund, Rodrigo Rato, saw fuel consumption holding up.
“We don’t see a great reduction in demand... There have been some hints that demand will be receding in the second quarter, but we see strong demand in the world,” Rato told Reuters.
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