Oil sinks on mixed inventory reportCrude and gasoline supplies post surprise decline, but heating oil reserves fall less than expected.NEW YORK (CNNMoney.com) -- Oil prices fell Wednesday after the government's inventory report showed a surprise drop in gasoline and crude supplies but a less than expected drawdown of distillates used to make heating oil. U.S. light crude for March delivery dropped $1.06 to settle at $58.00 a barrel on the New York Mercantile Exchange. Oil rose immediately following the report before pulling back. In its weekly inventory report, the Energy Information Administration said distillates, used to make heating oil and diesel fuel, declined by 3 million barrels last week. Analysts were looking for a decline of 4.2 million barrels, according to Reuters. But crude stocks posted a surprise decline, falling by 600,000 barrels, while gasoline supplies declined by 2 million barrels. Analysts were looking for a gain of 1.2 million barrels in crude stocks and a 1.9 million-barrel addition to gasoline supplies. Oil prices started out the year with a steep sell-off, briefly falling below $50 a barrel as a mild winter swelled heating oil supplies and doubts lingered about OPEC's ability to cut production. The drop below $50 was 36 percent less than oil's all-time, non-inflation-adjusted trading high of $78.40 reached last July. But crude prices have rebounded in the past couple of weeks, making a run at $60 several days in a row, as OPEC cuts took hold and cold weather moved into the Northeast, the world's largest heating oil market. Sabre rattling with Iran also lent support, as the country defied a U.N. mandate to stop enriching uranium and the United States sent another aircraft carrier strike group to the gulf. But crude never settled above $60, casting doubt as to whether oil prices would again trade in the $60s in the short term. Earlier this week, Saudi Arabia's oil minister said crude prices were comfortable in the $50 range, sparking speculation that OPEC will leave production unchanged at its upcoming meeting in March. Oil prices slid more than $2 on the news. In an effort to support prices, OPEC began cutting output last fall. Announced cuts now total some 1.7 million barrels. While few believe OPEC will ever get full compliance on output cuts, and estimates are notoriously inaccurate, many think OPEC has achieved a bit less than half of its announced cuts. Combined with other developments, this has apparently been enough to keep oil prices in the $50s. Some analysts commented that the market will be watching gasoline stockpiles more closely as the winter season wears on and the cold spell appears to have ended. Current forecasts call for temperatures to be about normal for the next week, then warming up after that. But others cautioned that the month of March still lay ahead and that March is always colder than people remember it being. Stocks of big oil companies, including BP (Charts), Exxon Mobil (Charts), ConocoPhillips (Charts), Chevron (Charts) and Royal Dutch Shell (Charts), have rebounded along with oil prices, with the AMEX oil and gas index now trading about even for the year. __________________ |
|
