Ample supplies prompt oil fall

CRUDE oil fell after failing to break above $60 a barrel in New York for a third straight day and a US government report showed fuel stockpiles to be ample.

The market opened higher each day this week before slipping later in the session.

Oil prices have jumped 14% in New York in the past three weeks as cold weather moved across the US, spurring heating-oil demand. Heating oil, diesel, crude oil and petroleum inventories last week were above the five-year average for the period, the US Energy Department said yesterday.

“There have been three attempts to break through $60, which have failed and are a sign to sell,” said Bill O’Grady, director of fundamental futures research at AG Edwards & Sons in St Louis. “We’ve had a good run higher and now it’s time for a bit of a correction. The only question is how far prices will go down.”

Crude oil for March delivery fell $1.17, or 2%, to close at $57.71 a barrel on the New York Mercantile Exchange. Futures are 8.5% lower than a year ago.

“There is major resistance at $60,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures in New York. “We won’t breach it unless we see a major change in the supply-demand fundamentals or the geopolitical situation worsens in a place like Iran.”

US petroleum supplies rose 2.6 million barrels to 227.2 million last week, the highest since February 1999, a US Energy Department report showed. The gain left stockpiles 4.5% above the five-year average, the department said. An increase of 1.63 million barrels was expected, according to the median of 14 responses in a Bloomberg survey prior to the report.

Petroleum for March delivery declined 3.1 cents, or 2%, to close at $1.5415 a gallon in New York.

Supplies of distillate fuel, a category that includes heating oil and diesel, slipped 3.63 million barrels to 136.3 million, the report showed. A 3 million barrel drop was expected, according to the survey.

“There was a big decline in distillate supplies but there won’t be that many more because we are in an advanced stage of the heating season,” said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. “The size of the gain in gasoline also caught people by surprise.”

Crude-oil inventories declined 449,000 barrels to 324.5 million, leaving stockpiles 9.8% above the five year average. An increase of 2 million barrels was expected, according to the Bloomberg News survey.

“The crude oil decline occurred on the West Coast so it’s no concern,” Mr Ritterbusch said. “They have a different market out there. They get the bulk of their shipments from Alaska, not OPEC, and aren’t connected to the rest of the country.”

Supplies on the West Coast fell 1.38 million barrels to 50 million last week, the report showed. The West Coast oil market is isolated from other parts of the US, making it difficult for supplies to move between it and other regions.