Oil Prices Fluctuating
It seems that the crude-oil futures jumped this week – enabling them to retake the $83-barrel level to close at the second-highest front-month level ever, after Energy Department inventory data showed an unexpected drawdown in supplies in the latest week. “The bottom line for crude is that there are concerns about the worldwide supply of oil going into the fourth quarter, but I don’t know if we’re ready for a big breakout to $85 or $90 a barrel just yet,” said Phil Flynn, senior oil analyst at Alaron Trading. The data showed a drop of 1.7 million barrels in crude-oil inventories in the week ended Oct. 5, compared to the previous week.
Analysts at MF Global had expected the figures to show a rise of 1.5 million barrels for the week, and analysts surveyed by Platts expected a 200,000-barrel build-up. The oil inventory data also showed that distillate fuel supplies fell by a larger-than-expected 600,000 barrels. Analysts at MF Global had predicted the data to show that distillates, which include heating oil, fell by 250,000 barrels. Analysts surveyed by Platts expected distillate stocks to have slipped 500,000 barrels.
Heating oil earlier set an all-time record high for a front-month contract of $2.2711 a gallon, breaking the old record of $2.2642 set on Sept. 8, said Flynn. “Essentially by making that new all-time high, oil is signaling what we’ve been hearing about for some time: It’s going to be a very expensive winter for consumers,” he said. “These charts are starting to look a little scary right now on heating oil and it’s not even cold outside yet.” At 320.1 million barrels, U.S. crude-oil inventories are still above the upper end of the average range for this time of year, the Energy Department release said.
Over the past four weeks, motor gasoline demand has averaged 9.2 million barrels per day, or 0.4% below the same period last year. Distillate fuel demand has averaged 4.2 million barrels per day over the past four weeks, up 1.3% compared to the same period last year, the data showed. The data also showed motor gasoline inventories rose by 1.7 million barrels last week.
MF Global had predicted the data to show that motor gasoline supplies would show a fall of 350,000 barrels, and analysts surveyed by Platts expected them to have remained unchanged. The Energy Department delayed its petroleum-supply reports to Thursday because of Monday’s Columbus Day holiday.
Tensions in northern Iraq are adding to fears of potential supply disruptions from that region, said John Person, president of NationalFutures.com. “Traders are apprehensive of being caught short in front of this situation and we are seeing short covering rally at the moment,” he said, adding that “the upside could be limited to the $84.50 level on this move unless something serious develops.”