BLBG: Crude Oil Falls Below $37 on Forecasts of U.S. Supply Increase
Crude oil fell below $37 a barrel in New York before a government report that’s forecast to show U.S. inventories rose for the 12th time in 13 weeks.
Stockpiles probably increased 500,000 barrels in the week ended Dec. 19, according to a Bloomberg News survey before today’s Energy Department report. Idemitsu Kosan Co., Japan’s second-biggest refiner, will cut crude processing next quarter because of weak demand in the third-largest oil-consuming nation.
“The continuing fear about the economy and demand are the focus of the market,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut. “It would take a sizable draw in today’s report to push prices higher, and that’s not expected.”
Crude oil for February delivery fell $1.55, or 4 percent, to $37.43 a barrel at 9:21 a.m. on the New York Mercantile Exchange. The contract dropped as low as $36.63 a barrel earlier today. Prices have declined 75 percent from a record $147.27 on July 11.
Oil for delivery in February 2010 is more than $14 higher than the current-month price, a market condition known as contango. This pattern encourages companies to store crude.
The Energy Department is scheduled to release its weekly report at 10:30 a.m. in Washington.
New York futures, which have fallen 61 percent this year, are poised for the first annual drop in seven years, as supplies increased and the Organization of Petroleum Exporting Countries failed to cut production quickly enough amid declining demand.
Market Sentiment
“It’s not surprising that prices are down when all the sentiment is lined up in one direction,” said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York.
OPEC Secretary-General Abdalla El Badri said prices will probably reach the group’s target of $75 a barrel in early 2010, Al Hayat, a London-based Arab daily, reported. OPEC doesn’t have a formal price target, though many members, including Saudi Arabia, have said the industry needs a $75 price to ensure adequate investment in new fields.
Brent crude oil for February settlement declined $1.93, 4.8 percent, to $37.98 a barrel on London’s ICE Futures Europe exchange. Futures touched $37.49, the lowest since Dec. 13, 2004.
Both the Nymex and ICE Futures Europe will be closed tomorrow. Floor trading in New York will end at 1:30 p.m. local time instead of the normal 2:30 p.m.
