U.S. oil consumption has weakened significantly in recent weeks amid high pump prices produced in the wake of Hurricane Katrina in late August, with many drivers switching to mass transit among taking other measures. Posted on 10/04/2005 1:32:49 PM PDT by M. Espinola
NEW YORK: Oil prices fell Tuesday for the third straight session amid signs of weakening demand and the prospect President George W. Bush's administration will tap the nation's heating oil emergency reserve.
U.S. oil consumption has weakened significantly in recent weeks amid high pump prices produced in the wake of Hurricane Katrina in late August, with many drivers switching to mass transit among taking other measures.
"The demand losses that have happened vastly exceed the seasonal decline," said Kyle Cooper, an analyst with Citigroup in Houston.
At the New York Mercantile Exchange, crude for November ended $1.57 lower at $63.90 after dropping as low as $63.00 earlier.
Gasoline futures fell 4.65 cents to close at $2.0157 a gallon, while heating oil futures fell 3.12 cents to $2.0497 per gallon.
The decline in demand has helped to soften the blow of the production and refinery outages produced by Katrina and Hurricane Rita last month. In addition, the release of oil from the nation's Strategic Petroleum Reserve and the prospect of a release from the emergency heating oil reserve have weighed on the market.
Comments by Energy Secretary Samuel Bodman that the U.S. is ready to tap the reserves if necessary "spooked the market yesterday and it's carrying over into today," said Tom Bentz, an analyst at BNP Paribas in New York. "People are still talking about it. It's coming off in extremely, extremely light volume."
In response to a question about whether Bush was willing to tap the reserves, Bodman said Monday, "We are prepared to do what is necessary with strategic reserves."
Bodman's comments followed earlier indications from the Paris-based International Energy Agency that the group also was willing to consider releasing additional petroleum supplies.
The agency, a watchdog group for the 26 industrialized nations of the Organization for Economic Cooperation and Development, may release more oil stocks to compensate for protracted production and refinery outages in the U.S., said the IEA's deputy executive director Bill Ramsay.
Bentz said that adding to the downward pressure on prices is concern about the health of demand and the U.S. economy.
"There is a perception that this shock that we have to the economy from the spike in prices and from the hurricanes perhaps woke people up," Bentz said. "I guess the spike in price did cause people to cut back."
He noted that the price decline comes despite the fact that some 3 million barrels a day in U.S. refining capacity and more than 90 percent of oil output in the Gulf of Mexico remain shut, suggesting growing concern about demand.
"Even though we have 3 million barrels a day of refining capacity shut, there is concern about demand," Bentz said.
Oil prices will likely remain in the $63-$68 range in the near term barring a major development, he said.
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The market is working...
What a suprise! Supply and demand actually work and Laffer's curve still applies.
I had a heating oil delivery yesterday--the price has doubled since last year...ouch. Sweaters for me this year.
Yup, high prices are slowing down demand.
Like clock work. Now I would like to get those pump prices lower, which should begin to gradually decrease.
Let's hope this coming winter is not a rough one. Heating oil right now is where it would be during a very severe winter season.
I have a nice sweater collection but it might be time to add more heavy wools (cashmere would be nicer).
Man, you couldn't tell that the demnd is down from where I've been working. It's a fuel pipeline terminal and the trucks have been lined up like there's no tomorrow. The terminal guys said that two other terminals were out of fuel and this one was draining fast. We won't have power back on til about eight tonight and they may be down to last 3.5 million gallon tank soon. They're currently filling 24 7500 gallon trucks an hour and they're open 16 hours a day. We've had the power to the pipeline pumps off since Sunday morning. They're filling the trucks using a couple of huge gen sets.
Personally, i won't be travelling to visit
relatives this Thanksgiving, or christmas
holdays...It's gonna be some long long distance
phone calls, and visiting with friends and family,
*in* town. I get the feeling, that I am going to
be far from alone in this, as many people look at
the coming winters heating bills.
And my area, usualy gets a couple of weeks of
just above zero/sub zero days and nights each
year...not to mention 3 or 4 more weeks of
"high" temps in the teens & low 20's...
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