OIL FUTURES: US Crude Down At 6-Week Low On Weak Demand

Published: Feb 02, 2012

By David Bird
Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--U.S. crude oil futures tumbled to a fresh six-week low, falling below $97 for the first time since Dec. 19, on weak demand and rising supplies.

U.S. oil demand, at a 13-year low last week, is "abysmal," said Kyle Cooper, managing partner at IAF Energy Advisors in Houston.

The combination of falling demand and resulting rising inventories in the world's biggest oil consumer is putting significant pressure on prices, which may now make a further downward move toward $90 a barrel, last hit in late October, he said.

Data released Wednesday show U.S. refineries last week cut crude processing to a nine-month low of 14.2 million barrels a day, helping inventories rise by a higher-than-expected 4.2 million barrels. At Cushing, Okla., the delivery point for the benchmark crude oil futures contract on the New York Mercantile Exchange, inventories rose to a six-week high, exerting pressure on the price of that contract.

Light, sweet crude oil futures on the New York Mercantile Exchange settled $1.25, or 1.3%, lower at $96.36 a barrel. The contract shed 3.4% after declining for five straight sessions.

Meanwhile, North Sea Brent crude, the European benchmark, advanced for a third day, settling 51 cents higher, at a three-week high of $112.07 a barrel. Analysts said refiners were lining up alternatives to Iranian oil ahead of tightening sanctions which include a European Union embargo. Brent's premium to U.S. crude at Cushing rose to $15.71 a barrel, the highest level since early November.

"The worries over Iran are supporting Brent" more than they are the U.S. benchmark, said Tom Bentz, director at BNP Paribas Prime Brokerage. "It almost looks as if they are to separate commodities. There is really not much they have in common at this point."

U.S. oil use posted the biggest single-week drop in 14 years to set a 13-year average daily low of 17.653 million barrels a day, according to the Energy Information Administration. Demand was 6% below a year ago as gasoline, the most-widely used petroleum product, fell 1.6% on week and 6.8% from a year earlier. The gasoline demand drop, to below 8 million barrels a day, came as retail prices averaged their highest-ever January level.

Gasoline stocks rose by 3 million barrels last week, far surpassing the rise of 200,000 barrels that was expected. Stocks now are sufficient to cover nearly 29 days of demand at current levels, the highest coverage in 13 years.

Reformulated gasoline blendstock futures for March delivery settled 2.33 cents lower at $2.8689 a gallon, while March heating oil settled 0.74 cent higher, at $3.0529 a gallon.

More information on settlements and highs and lows for futures on Nymex and ICE platforms
can be found by searching for the following headlines:

Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close

-By David Bird, Dow Jones Newswires; 212-416-2141; david.bird@dowjones.com