Royal Dutch Shell Plc  .com Rotating Header Image

Oil Is Steady After Biggest Drop in 18 Years on Slowing Demand

Bloomberg

 

 

Oil Is Steady After Biggest Drop in 18 Years on Slowing Demand 

By Nesa Subrahmaniyan

Oil had its largest dollar decline since Jan. 17, 1991, and the biggest percentage drop yesterday since March as Federal Reserve Chairman Ben S. Bernanke said risks to growth and inflation have risen. U.S. gasoline demand fell 5.2 percent last week, the 12th consecutive weekly drop, a MasterCard Inc. report showed yesterday.

“If a recession happens in the U.S. and if it’s a bad one, it could have an impact on the whole world and that is the fear,” said Anthony Nunan, Tokyo-based assistant general manager for risk management at Mitsubishi Corp. “This could be a temporary blip as demand in developing economies is still strong unless we see big rise in inventories or supplies.”

Crude oil for August delivery was up 6 cents at $138.80 a barrel at 9:42 a.m. Singapore time in electronic trading on the New York Mercantile Exchange. Futures reached a record $147.27 a barrel on July 11 and have risen 87 percent in the past year.

Oil fell as much as $9.26 to $135.92 a barrel yesterday and settled $6.44, or 4.4 percent, lower at $138.74 a barrel.

Fed Chairman Bernanke abandoned a June assessment that the threat of an economic slowdown had diminished.

The Organization of Petroleum Exporting Countries, supplier of about 40 percent of the world’s oil, cut its 2008 global oil demand forecast for a sixth month, citing lower demand for transport fuel in the U.S. It also said it expects demand for its crude will fall in 2009 as the global economy slows.

`OPEC Cautious’

“OPEC is too cautious to raise production or capacity as they feel demand may not come,” Mitsubishi’s Nunan said. “That is why the market will stay supported.”

Demand for OPEC crude next year will average 31.2 million barrels a day, a drop of 710,000 barrels a day from the forecast for 2008, the group said in its monthly oil market report yesterday.

“When it traded below $140, a big wave of selling hit,” said Addison Armstrong, director of market research at TFS Energy LLS in Stamford, Connecticut. “The market was trading a little bit above $140, and when it traded below, it fell something like $2 in a minute. Nothing seemed to hold it.”

Gasoline futures fell 17.29 cents, or 4.9 percent, to $3.3848 a gallon yesterday in New York. They were at $3.3849 at 8:03 a.m. in Singapore.

The profit margin, or crack spread, for making three barrels of crude into one of heating oil and two of gasoline, reached its lowest since March 19 yesterday, based on futures prices. The crack spread fell 40.32 cents to $10.9410 a barrel.

Brazil Output

Prices also fell as Petroleo Brasileiro SA, Brazil’s state- controlled oil company known as Petrobras, said it resumed normal output at the Campos Basin after a strike that began July 14.

Royal Dutch Shell Plc, Europe’s biggest oil company, ended a force majeure on exports of Nigerian Bonny Light crude. Force majeure is a legal clause that allows producers to miss deliveries because of circumstances beyond their control.

The clause was imposed after attacks on a crude-oil installation in May. The Movement for the Emancipation of the Niger Delta, known as MEND, has claimed responsibility for the attacks.

Brent crude oil for August settlement traded 1 cent higher at $138.76 a barrel at 8:06 a.m. Singapore time on London’s ICE Futures Europe exchange. Yesterday, it fell $5.17, or 3.6 percent, to $138.75 a barrel. The August contract, which expires today, reached a record $147.50 on July 11. The more widely held September contract dropped $5.47, or 3.8 percent, yesterday to $139.86 a barrel.

Lower Inventories

U.S. oil supplies probably fell last week as record prices discouraged buying by refiners, according to a Bloomberg News survey of analysts.

Crude supplies probably declined 2.2 million barrels in the week ended July 11 from 293.9 million the week before, according to the median of 10 responses by analysts surveyed before an Energy Department report at 10:35 a.m. Washington time today.

Gasoline stockpiles probably lost 100,000 barrels from 211.8 million barrels the week before, the survey showed. Distillate fuel, including heating oil and diesel, probably rose 2 million barrels from 122.5 million barrels the week before.

U.S. oil refineries probably operated at 89.2 percent of capacity, unchanged from the week before, the survey showed.

To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at[email protected]

Last Updated: July 15, 2008 21:58 EDT

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Oil Is Steady After Biggest Drop in 18 Years on Slowing Demand”

Leave a Comment

%d bloggers like this: