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Oil prices plunge to $64.80

Crude futures succumbed to profit taking after an initial rally on publication of the US Department of Energy (DoE) report.

New York’s main contract, light sweet crude for delivery in September sank 1.28 dollars to 64.80 dollars per barrel in electronic trade. In London, the price of Brent North Sea crude oil for delivery in October dropped $1.22 to $63.86 a barrel. The September contract expired Tuesday at $65.41.

Recent supply fears, heightened by production outages at US refineries, pushed London Brent to a record 66.85 dollars on Monday, while New York futures hit a historic high of 67.10 dollars last Friday.

Wednesday’s DoE data showed that gasoline stockpiles dived by 5.0 million barrels in the week to August 12. That was the seventh straight weekly decline and was far more than forecasts of a 1.5-million-barrel drop.

The decline, which came as US oil companies drew down their stocks to cope with summer driving demand, put levels of gasoline supplies “near the bottom end of the average range” for this time of year, the DoE said.

Crude oil inventories rose by 0.3 million barrels to 321.1 million barrels, “well above the upper end of the average range for this time of year”, but below predictions of a 1.0-million gain.

Stockpiles of distillate fuel, which make heating oil and diesel, increased by 1.2 million barrels to 131.1 million, in line with market expectations of a 1.6-million-barrel increase.

“It’s bullish gasoline, it’s even bullish distillate, but it’s neutral crude,” summarised Societe Generale analyst Deborah White.

“Last week, we had bearish numbers and a bullish reaction. This week, we have bullish numbers and a bearish reaction.”

Prices peaked shortly after publication of the DoE data.

“But then people took the opportunity to sell, to cash in to get some profits,” White said.

With the price back under 65 dollars, the market will “have a tremendous amount of buyers interested”.

Meanwhile, the Organisation of Petroleum Exporting Countries (Opec) said it had cut its estimate for growth in global oil demand in 2005 to 1.9 per cent from 2.0 per cent but had increased its forecasts for 2006.

Opec said it now saw the increase in oil demand in 2005 being 40,000 barrels per day less than its previous estimate.

Daily oil demand was expected to increase by 1.58 million barrels per day on average during 2005 compared with 2004, bringing total global consumption to 83.6 million barrels per day.

Crude prices have fallen from record high points but market sentiment has remained bullish due to continued strong appetite for oil, analysts said.

“The bull trend looks set to remain intact, supported by continued strong demand growth and fears about the supply levels of both crude and refined products going forwards,” Sucden analyst Sam Tilley said.