Posted on 08/25/2004 1:53:36 PM PDT by Smogger
NEW YORK (Reuters) - Oil prices fell nearly $2 a barrel on Wednesday, dragged down by heavy losses in U.S. gasoline futures after summer driving demand in the world's largest consumer failed to meet expectations.
U.S. light crude on the New York Mercantile Exchange ended down $1.74 to settle at $43.47 a barrel, its lowest closing level since Aug. 4. It fell as low as $43.22 on the day.
London Brent closed down $1.64 at $40.68 a barrel.
Prices are now down nearly $6 from record highs last week.
Sellers overwhelmed the market after the U.S. Energy Information Administration said U.S. gasoline stocks were unchanged at 205.7 million barrels last week, near the upper end of their five-year average.
Analysts had expected gasoline supplies to decline due to summer vacation consumption, but the EIA said gasoline demand over the past four weeks was just 0.7 percent higher than last year.
"Gasoline appears to be the weakest link in the complex right now. That's typical, as we're just 10 days until the end of the summer driving season," said Marshall Steeves, a market analyst at Refco Group.
The weak performance in gasoline stocks outweighed a fall of 1.7 million barrels in crude stocks to 291.3 million barrels, pulling inventories to their lowest level in five months.
Crude stocks fell as refineries worked at 96 percent of capacity, eating up feedstocks at a rate of 16.05 million bpd.
"We're seeing runs at unusually strong pace for this time of year, chewing into crude supplies," said Jim Ritterbusch, president of Ritterbusch and Associates.
Diesel fuel demand this summer has been unusually high, due in part to surging freight activity and manufacturing. Distillate fuel demand, including diesel, is running more than 7 percent above last year.
U.S. EMERGENCY RESERVES
On Tuesday, the Bush administration indicated it would tap the U.S. emergency crude oil stockpile if imports of 6 million barrels per day, or about half of the nation's daily oil and petroleum purchases, were halted.
Vice President Dick Cheney's comments during a campaign appearance in Iowa marked the first time the administration has given a specific example of the type of emergency that would cause it to tap the stockpile.
Cheney made it clear that the White House was not budging from its position, and would not release emergency oil unless there was a "national crisis."
If the United States "were dealing with a situation where we lost 5 or 6 million barrels a day, for example, out of the 20 million barrels a day that we currently consume, that would be the kind of national crisis that would drive prices so high and probably bring large parts of our economy to a halt," Cheney said. Such a situation would require using the oil reserve, he added.
The United States imports about 11 million barrels per day of crude oil, gasoline and other petroleum products.
The kind of shortfall that Cheney described would be the equivalent of the United States losing its top four oil suppliers -- Canada, Mexico, Saudi Arabia and Venezuela. The four nations exported 5.9 million barrels per day to the U.S. market during the first half of this year.
IRAQ BACK
Oil prices fell this week after Iraq restored full crude exports of 2 million barrels a day from its southern Basra fields and restarted deliveries at 450,000 bpd, half capacity, from its northern Kirkuk fields for the first time since May.
Worries about an output cut from Russia's leading producer, YUKOS, which is battling to avoid bankruptcy, have also eased after Russian President Vladimir Putin gave President Bush an assurance on Russian supplies.
Russia has allocated YUKOS its usual crude export levels through major ports in September, including 520,000 tons through the Baltic port of Primorsk, where total volumes will set a record.
So far there is not much evidence that fuel costs are undercutting economic growth, either in big industrial powers or in emerging economies such as China and India.
European Central Bank President Jean-Claude Trichet said on Wednesday the bank's outlook for euro zone growth remained unchanged.
"All things considered, petrol prices and all the rest, I don't think there is a need to revise downwards our forecasts for growth for the euro zone," Trichet said.
He said the situation was not comparable with the energy crises of the 1970s and 1980s, because current oil price increases were not on the same scale and economies now were better protected against fuel costs.
It would be nice to have it drop down to $30 a barrel in the next month, just so we can hear kerry and the press can cry conspiracy.
as long as it keeps going down.
"Analysts had expected gasoline supplies to decline due to summer vacation consumption, but the EIA said gasoline demand over the past four weeks was just 0.7 percent higher than last year. "
Is this a good thing?
And the DJIA jumps 80+ points today...
I love it.
Last week the Headlines were "Oil will never be this cheap."
Everytime the chicken littles screech about oil, be asured the price will go down.
The oil runup recently reminded me of the gold runup in the commodities market I was involved in during the late 70s/early 80s. I would not have touched this market during the past two months with a ten foot pole (unless I limited my loss by going into options...)
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It's amazing how markets are manipulated.
The money houses "leak" a story, saying oil is going to continue to go sky high, all the while selling their positions to a bunch of unsuspecting dupes.
Serves the speculators right after they've run up the gas prices for the rest of us all summer. We have seriously cut down on our driving this summer and it hasn't been hard at all.
The hedge funds and other big players really speculate short-term. Around options and future expirations the market vacillates wildly.
very true - most newbies to commodities have no idea how much falsehood they are being fed - if i had been forced to bet on oil prices a week ago, i would have bet short - but it is very dangerous when there is a blowout market like this one is now.
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They push stocks the same way.
Anyone who thinks they're getting objective advice is a fool. The big moneyhouses talk a stock up in hopes of getting that company's business.
I remember when some moron from one of the big Brokerage houses called Doubleclick.com a "strong buy." Turns out this same moron had called 144 companies a "strong buy,: one a "hold," and none a "sell." I'm sure he's still on TV somewhere.
Stocks are not so subject to manipulation, with the exception of the smaller, not so well traded ones. The larger stocks with the bulk of assets are relatively transparently traded, though clearly the big guys are able to take some advantage by virtue of their communications networking within industries that the smaller traders are unlikely to be able to do.
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When Huge Brokerage House recommends the buying or selling of a certain stock, it moves the price.
They are not subject to manipulation caused by the stock pools Joe Kennedy used to participate in, but they are still manipulated.
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