Oil tests 6-month low on inventory Distillate supplies, used to make diesel fuel and heating oil, swell. NEW YORK (CNNMoney.com) -- Oil prices fell Wednesday, hovering near six-month lows, after the government said supplies of distillates used for heating swelled far more than expected. U.S. light crude for October delivery lost $1.20 to settle at $60.40 a barrel on the New York Mercantile Exchange. Oil was down 48 cents just prior to the Energy Information Administration's 10:30 a.m. ET release of its weekly inventory report.
The EIA said distillate stocks swelled by 4.1 million barrels last week. Analysts were looking for a rise of 1.9 million barrels, according to Reuters. Crude stocks fell by 2.8 million barrels, while gasoline supplies rose by 600,000 barrels. Analysts were looking for a 1.6 million barrel drop in crude supplies and a 100,000 build in gasoline stocks. Oil prices have tumbled more than 20 percent since July's record trading high of $78.40 and are now lower for the year, although they still remain about three times higher than the beginning of 2002. Several factors have contributed to the decline, including easing of tensions in the Middle East, the end of the summer driving season in the U.S., brimming stockpiles, an as-yet tame hurricane season, predictions of a warm winter and fears of a slowing economy. But it's unclear how much further prices will fall, as the recent slide has prompted talk within OPEC that could indicate a looming production cut. Reuters said Saudi Oil Minister Ali al-Naimi on Tuesday described prices as reasonable for the first time since the market scaled record highs. "The oil industry is convinced that this price is reasonable," Naimi was quoted saying by Reuters. "Prices now are rewarding to both producers and consumers, and their impact on the global economy is small." Some OPEC ministers have signaled that a price of $50-$60 a barrel should be sustained, but the cartel has avoided setting a formal target. The OPEC basket stood at $58.85 on Tuesday. "It all depends now on how fast the price declines," BNP Paribas analyst Eoin O'Callaghan told Reuters. "It would be difficult for OPEC to justify a cut with the U.S. price above $60 and concerns about a U.S. economic slowdown. But it is our view that sometime in the near future OPEC will have to cut." Oil supply risks related to Iran's nuclear program also appeared to be easing further as U.S. Undersecretary of State Nicholas Burns said Washington would support further talks by European negotiator Javier Solana to find a diplomatic solution. Shares of oil companies were mixed after the report. Exxon Mobil (Charts) was higher, while ConocoPhilips (Charts) and Chevron (Charts) edged down. From staff and wire reports ________________________ |
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