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The Wall Street Journal: Crude Oil Slips to a Four-Week Low

Wall Street Journal Chart

October 9, 2007; Page C9

NEW YORK — Crude oil futures slumped below $80 a barrel, a four-week low, as the dollar strengthened and as storm threats to U.S. Gulf of Mexico energy production diminished.

Signs that Royal Dutch Shell’s Nigerian oil production is set to increase also weighed on prices in quiet trading during the Columbus Day holiday in the U.S.

The front-month November light, sweet crude contract on the New York Mercantile Exchange fell $2.20, or 2.7%, to $79.02 a barrel.
In a sign that Shell is set to pump more oil in Nigeria, the oil company lifted force majeure yesterday on its Forcados oil export terminal. A “force majeure” clause allows a party to get out of contractual obligations due to an extraordinary event beyond its control, such as war or hurricanes.

In July, Shell had said a small amount of production, between 1% and 3% of capacity, had returned from the Forcados field. The Forcados platform operated at a capacity of 380,000 barrels a day of oil before militant attacks shut it down in 2006. There was no indication of current Forcados production.

Storm threats to the U.S. Gulf are also starting to ease. As the Atlantic hurricane season moves further past September, historically the peak month for major storms, there is less chance of major production damage in the Gulf of Mexico. The one disturbance in the northwestern Gulf of Mexico that was a threat to oil production dissipated over the weekend.

Meanwhile, the U.S. dollar strengthened because of stronger-than-expected employment data released Friday, as traders bet there was less chance for more U.S. interest-rate cuts. A weaker dollar has helped boost crude prices in recent months because it makes oil cheaper for buyers using other currencies. The euro was recently at $1.4042, from $1.4135 late Friday.

Prices have now been in a fairly tight range for more than three weeks, trading since Sept. 13 between $78.25 a barrel and their intraday record $83.90, reached Sept. 20. If prices move below that range, technical traders, who look to chart patterns for signs of where crude will head next, are expecting further losses.

The premium of the front-month contract over the second month continued to narrow and was recently at 64 cents a barrel. The difference extended out as much as $2 a barrel last month and was taken as a sign that near-term crude oil stocks were tight. The narrowing is being viewed as a sign crude prices may be set to weaken.

In other commodity markets:

WHEAT: Futures fell to their daily exchange-imposed price as the market continues to correct after the recent rally to all-time highs. Chicago Board of Trade December wheat fell 30 cents to $8.60 per bushel.

COPPER: An absence of Chinese buying combined with a stronger U.S. dollar sent copper sharply lower, analysts said. Nearby October fell 10.35 cents a pound to $3.5930 on the Comex division of the New York Mercantile Exchange.

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1 Comment on “The Wall Street Journal: Crude Oil Slips to a Four-Week Low”

  1. #1 Prosper A. Abdulaziz
    on Oct 10th, 2007 at 07:42

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