Update 10: Oil Prices Slip Below $48 a Barrel Mark
05.13.2005, 12:46 PM
Oil prices slipped below $48 a barrel Friday, weighed down for the third straight day by rising supplies in the United States and slower demand growth in China.
Brokers noted the recent strengthening of the dollar relative to other foreign currencies, which has made many commodities cheaper, including oil.
They also said that oil prices could slip further in the weeks ahead if speculators bail out of the market, but cautioned that too sharp a drop in prices might prompt a production cut from the Organization of Petroleum Exporting Countries.
Light, sweet crude for June delivery fell 64 cents to $47.90 a barrel in midday trade on the New York Mercantile Exchange, where gasoline and heating oil futures also declined.
Oil prices have fallen by nearly $4 a barrel over the past three days, with Nymex futures now trading about $10 below the intraday peak reached early last month.
"It does seem that demand is not as robust as previously thought," said Andrew Lebow, senior vice president at Man Financial Inc. in New York. Moreover, the commercial supply of crude oil in the United States is at its highest level since March 2002 and, from a technical trading standpoint, all charts indicate that prices are headed even lower in the near-term.
However, Lebow said "it's way too soon to say that the market has turned from a long-term bull to a long-term bear."
Nymex gasoline futures dropped 3.50 cents to $1.397 per gallon, while heating oil futures declined by 1.51 cent to $1.3645 per gallon.
On London's International Petroleum Exchange, June Brent crude futures fell 12 cents to $48.22 per barrel.
At their peak in early April, oil prices were 67 percent higher than a year ago, now they are about 18 percent higher than a year ago.
"You can only bet so long that supplies are going to grow tight," said James Cordier, president of Liberty Trading Group in Tampa, Fla.
"When we were racing toward $60 a barrel, it was mostly speculative driven. Certain people were calling for $90 and $100 crude and the public was pouring money into commodity funds," Cordier said. "As those positions lighten up, it could bring us to the $45 level... There's still a little fluff in the market."
One catalyst for the decline in oil prices on Friday was the rise of the dollar, which was up for a third day against major currencies, reaching a new high for the year against the euro. The dollar's rise drove the euro down to $1.2635 from $1.2694 late Thursday in New York. That's the lowest the euro has been against the dollar since mid-October.
The recent downward momentum began Wednesday when the U.S. Energy Department said domestic crude inventories grew by 2.7 million barrels last week to 329.7 million barrels, or 10 percent above year-ago levels. Crude inventories have been building steadily for the past three months.
The Paris-based International Energy Agency also said Wednesday that oil demand in China rose 4.5 percent in the first quarter, a sharp decline from the 19.3 percent year-on-year jump in the first three months of 2004. China is the world's second-largest consumer of crude behind the United States, and rapidly increasing demand there has been blamed for dwindling supplies.
Vienna's PVM Oil Associates said in its daily energy market report that prices could slide to the lower $40s. "But summer driving and winter heating demand, as well as tight up- and downstream capacity in the third and fourth quarters should combine to return levels to $50 again, if not higher, particularly if there are any outages or other supply related problems."
In London, Deutsche Bank analyst Adam Sieminski also said crude would probably trade between $40 and $50 a barrel into summer.
Prices are "going to go down as far as the Saudis are comfortable with and they will stop when the Saudis become uncomfortable," he said.
05.13.2005, 12:46 PM
Oil prices slipped below $48 a barrel Friday, weighed down for the third straight day by rising supplies in the United States and slower demand growth in China.
Brokers noted the recent strengthening of the dollar relative to other foreign currencies, which has made many commodities cheaper, including oil.
They also said that oil prices could slip further in the weeks ahead if speculators bail out of the market, but cautioned that too sharp a drop in prices might prompt a production cut from the Organization of Petroleum Exporting Countries.
Light, sweet crude for June delivery fell 64 cents to $47.90 a barrel in midday trade on the New York Mercantile Exchange, where gasoline and heating oil futures also declined.
Oil prices have fallen by nearly $4 a barrel over the past three days, with Nymex futures now trading about $10 below the intraday peak reached early last month.
"It does seem that demand is not as robust as previously thought," said Andrew Lebow, senior vice president at Man Financial Inc. in New York. Moreover, the commercial supply of crude oil in the United States is at its highest level since March 2002 and, from a technical trading standpoint, all charts indicate that prices are headed even lower in the near-term.
However, Lebow said "it's way too soon to say that the market has turned from a long-term bull to a long-term bear."
Nymex gasoline futures dropped 3.50 cents to $1.397 per gallon, while heating oil futures declined by 1.51 cent to $1.3645 per gallon.
On London's International Petroleum Exchange, June Brent crude futures fell 12 cents to $48.22 per barrel.
At their peak in early April, oil prices were 67 percent higher than a year ago, now they are about 18 percent higher than a year ago.
"You can only bet so long that supplies are going to grow tight," said James Cordier, president of Liberty Trading Group in Tampa, Fla.
"When we were racing toward $60 a barrel, it was mostly speculative driven. Certain people were calling for $90 and $100 crude and the public was pouring money into commodity funds," Cordier said. "As those positions lighten up, it could bring us to the $45 level... There's still a little fluff in the market."
One catalyst for the decline in oil prices on Friday was the rise of the dollar, which was up for a third day against major currencies, reaching a new high for the year against the euro. The dollar's rise drove the euro down to $1.2635 from $1.2694 late Thursday in New York. That's the lowest the euro has been against the dollar since mid-October.
The recent downward momentum began Wednesday when the U.S. Energy Department said domestic crude inventories grew by 2.7 million barrels last week to 329.7 million barrels, or 10 percent above year-ago levels. Crude inventories have been building steadily for the past three months.
The Paris-based International Energy Agency also said Wednesday that oil demand in China rose 4.5 percent in the first quarter, a sharp decline from the 19.3 percent year-on-year jump in the first three months of 2004. China is the world's second-largest consumer of crude behind the United States, and rapidly increasing demand there has been blamed for dwindling supplies.
Vienna's PVM Oil Associates said in its daily energy market report that prices could slide to the lower $40s. "But summer driving and winter heating demand, as well as tight up- and downstream capacity in the third and fourth quarters should combine to return levels to $50 again, if not higher, particularly if there are any outages or other supply related problems."
In London, Deutsche Bank analyst Adam Sieminski also said crude would probably trade between $40 and $50 a barrel into summer.
Prices are "going to go down as far as the Saudis are comfortable with and they will stop when the Saudis become uncomfortable," he said.
