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Oil tumbles back near $43
Crude sinks for a 2nd day as hot money heads for the exits after report shows inventories rising.
December 2, 2004: 5:50 PM EST

NEW YORK (CNN/Money) - Oil prices plunged for the second straight session Thursday, closing below $44 a barrel, after an increase in U.S. heating oil stocks triggered heavy selling from big-money speculative funds.

Light crude for January delivery settled down $2.24 to $43.25 a barrel, a drop of 4.9 percent, to the lowest level since mid-September. In London, Brent sank $2.16, or nearly 5 percent, to $40.15 a barrel.

U.S. crude sank 7.4 percent Wednesday, the biggest one-day drop since September 2001. Prices are more than $11 below their October all-time trading high, though they're still up 37 percent from the start of the year.

Previously limited stockpiles of heating fuel are rising as U.S. refineries pick up the pace following seasonal maintenance while unusually mild weather in the Northeast has limited demand. The Northeast is the world's largest market for home heating oil.

A government agency reported Wednesday that distillate stocks, including heating oil and diesel, rose 2.3 million barrels in the week to Nov. 26 to 117.9 million barrels.

The energy brokerage Refco said the inventory buildup led to "a massive fund bailout across the energy sector," and that "demand for heating fuel at the moment is low and is likely to remain so over the next couple of weeks given moderate forecasts for the eastern and Midwestern U.S."

OPEC pumps on

Crude stocks are building too as OPEC oil producers pump at the highest level in 25 years. Signals from the cartel that it will keep pumping at current levels are also dragging prices down.

OPEC's outgoing president and secretary general said Thursday that the group will allow members to continue pumping above official quotas in the first quarter of next year if oil prices stay high.

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OPEC is due to meet in Cairo on Dec. 10 to decide output policy for the first quarter. OPEC's 10 members excluding Iraq pumped an estimated 27.9 million barrels per day (bpd) in October, 900,000 over a ceiling that came into effect Nov. 1.

The oil cartel's second-biggest producer Iran has said the group should trim quota-busting output to avoid a winter stock build. The group has projected a big winter inventory build if it keeps pumping at current rates.

Cartel earnings have also been hit by the weaker dollar, which has fallen to a succession of life lows versus the euro, and big discounts for its mainly heavy, sour exports.

The group's basket price recently has been about $10 a barrel below U.S. futures.

Nigeria's top oil official reiterated that he did not believe OPEC oil producers needed to rein in overproduction.

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"The prices are still up there," said Edmund Daukoru, Nigeria's Presidential Adviser on Petroleum Affairs on the sidelines of a conference in Rome, quoted by Reuters.

"To cut production would be giving the wrong signal. We are committed to economic growth and to cut production will give the opposite signal," he added.

The U.S. Energy Information Administration (EIA) said in a separate report on Wednesday that oil prices were not likely to fall much further, averaging between $45 and $50 a barrel this winter.

Several forecasters expect temperatures to fall below normal in the Northeast in the new year, lifting demand.  Top of page


-- Reuters contributed to the story




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.