Oil hits 18-month low as demand falls

CRUDE oil fell, closing below $54 a barrel in New York for the first time in more than 18 months, after a US Energy Department report showed that US fuel stockpiles rose for a fourth week.

Inventories of distillate fuel, a category that includes heating oil and diesel, surged 5.4 million barrels to 141 million in the week ended January 5, the biggest gain since January 2004, the report showed. Petrol supplies rose 3.76 million barrels to 213.3 million. Crude oil stockpiles fell as refineries increased operations to the highest rate since September.

“The petroleum product increases in the report were huge, overshadowing everything else,” said Aaron Kildow, a broker at Prudential Financial Derivatives in New York. “The drop in crude oil stocks is being shrugged off because most end users can’t use crude oil.”

Crude oil for February delivery fell $1.66, or 3%, to $53.98 a barrel at the 2.30pm close of floor trading on the New York Mercantile Exchange. Futures fell as low as $53.80, the lowest since June 13, 2005. Prices are down 15% from a year ago.

Oil in New York has fallen 21% in the past year when measured in euros, 22% in British pounds and 11% in yen.

Distillate supplies were forecast to increase two million barrels, according to the median of responses by 14 analysts surveyed before the release of the report. Petrol inventories were expected to jump 2.5 million barrels, according to the survey.

Heating demand in the US northeast, the region responsible for 80% of US heating oil consumption, will be 24% below normal in the week ended January 16, forecasters said.

New York had its third-warmest December on record.

“The gain in distillate stocks is definitely related to the warm weather,” said Eric Wittenauer, an energy analyst at AG Edwards & Sons in St Louis. “Refiners are really ramping up production after a longer-than-expected maintenance season this fall. This is the time of year when refineries like to build up gasoline stockpiles.”

Refineries operated at 91.5% of capacity last week, the highest since the week ended September 22, the report showed. Analysts surveyed prior to the report’s release expected operating rates to be unchanged at 91% of capacity.

OPEC said yesterday it will speed up a 500,000 barrel-a-day output cut by almost a month in a bid to prevent further falls in oil prices.