MW: Oil prices rise as traders bet on an OPEC output cut
U.S. retail gasoline prices fall back to year-ago level; natural-gas futures sink
By Myra P. Saefong & Moming Zhou, MarketWatch
SAN FRANCISCO (MarketWatch) -- Crude-oil futures climbed Thursday to trade above a 16-month low, finding some support from expectations that members of the Organization of the Petroleum Exporting Countries will decide to cut production levels as they gather this week for a meeting in Vienna.
But prices for natural gas fell around 3% after a U.S. government report showed that supplies of the commodity remained above the five-year average.
Crude for December delivery was last up 85 cents, or 1.3%, at $67.60 a barrel on the New York Mercantile Exchange. It slumped 7.5% Wednesday to close at the lowest since June 2007.
More recently in electronic trading on Globex, the contract was at $68.15, up $1.40, or 2%, recovering from an earlier low of $65.90. That level marked a fresh 16-month intraday low for a front-month contract.
The 13 members of OPEC, scheduled for an official meeting Friday, are expected to cut their oil production quotas in a bid to boost oil prices, but face a difficult task to find a balance between rising U.S. supplies, predictions for weaker production and ongoing concerns over the global economy. See Commodities Corner.
Slower economic growth is dampening energy demand in the U.S., which accounts for nearly a quarter of the world's petroleum consumption. Crude supplies rose for a fourth week, up 3.2 million barrels for the week ended Oct. 17, the U.S. Energy Information Administration reported Wednesday. See Wednesday's story.
The supply report Wednesday was "almost like a painting that displays the emotions and the realities of an economy undergoing stress and the pain of historical proportions," Phil Flynn, a vice president at Alaron Trading, said in a note to clients. "We are seeing activity in energy that we have not seen in decades."
The market is seeing "demand drops of historic proportions, especially in gasoline, [and] that shows the economy and regular people are hurting," said Flynn. Gasoline demand dropped 5.2% in the third quarter, hitting it lowest level in a decade, he said.
Gasoline demand averaged 8.8 million barrels per day over the last four-week period, down 4.3% from the same time a year ago, according to the EIA.
On Globex Thursday, November reformulated gasoline was nearly flat at $1.57 a gallon, while November heating oil rose 1.2 cents to $2.0486 a gallon.
The U.S. retail price for a gallon of regular gasoline on Thursday dropped back to match the year-ago level. It stood at $2.822, down from $2.858 Wednesday, according to AAA's Daily Fuel Gauge Report. Prices are down over 30% from their record high of $4.114 from July 17 of this year, the data showed.
Crude prices have slumped more than 50% from their record high above $147 per barrel also seen in July.
Natural-gas prices slip
Meanwhile, natural-gas prices moved lower. The EIA reported Thursday that supplies of natural gas in storage rose 70 billion cubic feet for the week ended Oct. 17.
Analysts at Global Insight expected a climb of 80 billion. But Beth Sewell, a managing partner at Quantum Gas & Power Services said some market expectations were between 60 billion and 70 billion.
November natural-gas futures fell 23.7 cents, or 3.5%, to $6.54 per million British thermal units.
Total stocks now stand at 3.347 trillion cubic feet, down 77 billion cubic feet from the year-ago level but 93 billion cubic feet above the five-year average, the government data said.
If weather this winter is "normal with pockets of colder than normal, there's enough in tank to supply demand," said Sewell.
But if it's warmer than normal, then there could be an "oversupply situation," she said.
Tracking the commodities market as a whole, the Reuters/Jefferies CRB Index , a benchmark gauging the prices of major commodities, rose by 0.3%.
Gold futures extended the previous session's losses to touch a low below $700 an ounce. See Metals Stocks. The World Gold Council said that gold prices have slumped because of fund liquidation and a stronger dollar. See full story.
