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Crude Oil Plunges as Mild U.S. Weather Curbs Fuel Consumption
By Mark Shenk
Jan. 4 (Bloomberg) -- Crude oil in New York fell 7.5 percent in the last two days, the biggest two-day drop since December 2004, as mild U.S. weather curbed heating-fuel use.
Home heating demand in the Northeast, where four-fifths of U.S. heating oil is used, will be 40 percent below normal through Jan. 11, forecaster Weather Derivatives said today. The decline accelerated after the Energy Department reported that U.S. fuel supplies surged last week.
``We're getting follow-through from yesterday because the picture hasn't changed,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``The temperature forecasts keep going up, which, combined with a relatively quiet geopolitical picture, is clobbering both crude and heating oil.''
Crude oil for February delivery fell $1.83, or 3.2 percent, to $56.49 a barrel at 1:16 p.m. on the New York Mercantile Exchange. Futures touched $56.22, the lowest since Nov. 17. Prices are down 11 percent from a year ago. Yesterday, oil prices plunged the most in 20 months.
Prices are down 28 percent from the record of $78.40 a barrel reached on July 14. The Organization of Petroleum Exporting Countries agreed to make two production cuts in the past three months. Members of OPEC, the group responsible for about 40 percent of global oil output, said high oil inventories in consuming countries may lead to falling prices.
Lower Inflation
``Prices are still high historically,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina. ``There should be some easing of inflationary pressure while at the same time revenue should remain strong for both companies and countries that produce oil.''
Inflation in the euro area held below the European Central Bank's 2 percent ceiling in December for a fourth month as energy prices declined and the euro rose. Consumer prices increased 1.9 percent from a year earlier, Eurostat, the European Union's statistics office in Luxembourg, said today.
Crude oil in New York has fallen 18 percent in the past year when measured in euros, 19 percent in British pounds and 8.5 percent in yen.
Federal Reserve officials concluded that the risk of inflation was ``the predominant concern'' last month, the Federal Open Market Committee said yesterday in minutes of the Dec. 12 session released in Washington.
Above-normal temperatures will cover the eastern U.S. from Jan. 9 through Jan. 13, the National Weather Service said yesterday.
``We are seeing a fall temperature range instead of one you would expect in winter,'' said Dale Mohler, senior meteorologist at AccuWeather Inc. in State College, Pennsylvania. ``It was mild most of December and the warmth is continuing into January. The long-lasting nature of this mild weather is what is surprising.''
Warmest Year
The world is likely to experience its warmest recorded year in 2007 because of the effects of the El Nino weather pattern and global warming, the U.K. government's weather forecasting division said toady. There is a 60 percent chance that this year will be hotter than 1998, the current warmest year, according to the Met Office, which is based in Exeter, England.
The main factor behind the prediction is the onset last year of El Nino, a warming of the eastern Pacific's equatorial waters that occurs every two to seven years, the Met office said.
Heating oil for February delivery fell 2.42 cents, or 1.5 percent, to $1.5639 a gallon in New York. Futures touched $1.5615 a gallon, the lowest since July 25, 2005.
Inventory Report
Supplies of distillate fuel, a category that includes heating oil and diesel, jumped 1.97 million barrels to 135.6 million last week, the biggest increase since the week ended Sept. 22, the Energy Department reported. A gain of 835,000 barrels was expected, according to the median of 13 responses in a Bloomberg News survey.
Gasoline stockpiles rose 5.68 million barrels to 209.5 million barrels, the biggest one-week gain since the week ended Sept. 22, the report showed.
The department released its weekly report on petroleum inventories a day later than usual because of the New Year's holiday on Jan. 1.
The department said yesterday it published incorrect oil- supply data on Dec. 20 and that the error will not be corrected. The department reported on Dec. 28 that midwestern supplies in the week ended Dec. 22 were 17 percent higher at 80.5 million barrels and total U.S. supplies were at 329.1 million, 3.6 percent higher than actual.
U.S. crude-oil inventories for that week plunged a record 17.8 million barrels, or 5.4 percent, department spokesman Jonathan Cogan said in a phone interview today. The previous record was 15.2 million barrels, or 4.5 percent, in the week ended Jan. 1, 1999.
Brent crude oil for February settlement fell $1.85, or 3.2 percent, to $56.11 a barrel on the London-based ICE Futures exchange. Futures touched $55.87 a barrel, the lowest since Dec. 28, 2005.
By Mark Shenk
Jan. 4 (Bloomberg) -- Crude oil in New York fell 7.5 percent in the last two days, the biggest two-day drop since December 2004, as mild U.S. weather curbed heating-fuel use.
Home heating demand in the Northeast, where four-fifths of U.S. heating oil is used, will be 40 percent below normal through Jan. 11, forecaster Weather Derivatives said today. The decline accelerated after the Energy Department reported that U.S. fuel supplies surged last week.
``We're getting follow-through from yesterday because the picture hasn't changed,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``The temperature forecasts keep going up, which, combined with a relatively quiet geopolitical picture, is clobbering both crude and heating oil.''
Crude oil for February delivery fell $1.83, or 3.2 percent, to $56.49 a barrel at 1:16 p.m. on the New York Mercantile Exchange. Futures touched $56.22, the lowest since Nov. 17. Prices are down 11 percent from a year ago. Yesterday, oil prices plunged the most in 20 months.
Prices are down 28 percent from the record of $78.40 a barrel reached on July 14. The Organization of Petroleum Exporting Countries agreed to make two production cuts in the past three months. Members of OPEC, the group responsible for about 40 percent of global oil output, said high oil inventories in consuming countries may lead to falling prices.
Lower Inflation
``Prices are still high historically,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina. ``There should be some easing of inflationary pressure while at the same time revenue should remain strong for both companies and countries that produce oil.''
Inflation in the euro area held below the European Central Bank's 2 percent ceiling in December for a fourth month as energy prices declined and the euro rose. Consumer prices increased 1.9 percent from a year earlier, Eurostat, the European Union's statistics office in Luxembourg, said today.
Crude oil in New York has fallen 18 percent in the past year when measured in euros, 19 percent in British pounds and 8.5 percent in yen.
Federal Reserve officials concluded that the risk of inflation was ``the predominant concern'' last month, the Federal Open Market Committee said yesterday in minutes of the Dec. 12 session released in Washington.
Above-normal temperatures will cover the eastern U.S. from Jan. 9 through Jan. 13, the National Weather Service said yesterday.
``We are seeing a fall temperature range instead of one you would expect in winter,'' said Dale Mohler, senior meteorologist at AccuWeather Inc. in State College, Pennsylvania. ``It was mild most of December and the warmth is continuing into January. The long-lasting nature of this mild weather is what is surprising.''
Warmest Year
The world is likely to experience its warmest recorded year in 2007 because of the effects of the El Nino weather pattern and global warming, the U.K. government's weather forecasting division said toady. There is a 60 percent chance that this year will be hotter than 1998, the current warmest year, according to the Met Office, which is based in Exeter, England.
The main factor behind the prediction is the onset last year of El Nino, a warming of the eastern Pacific's equatorial waters that occurs every two to seven years, the Met office said.
Heating oil for February delivery fell 2.42 cents, or 1.5 percent, to $1.5639 a gallon in New York. Futures touched $1.5615 a gallon, the lowest since July 25, 2005.
Inventory Report
Supplies of distillate fuel, a category that includes heating oil and diesel, jumped 1.97 million barrels to 135.6 million last week, the biggest increase since the week ended Sept. 22, the Energy Department reported. A gain of 835,000 barrels was expected, according to the median of 13 responses in a Bloomberg News survey.
Gasoline stockpiles rose 5.68 million barrels to 209.5 million barrels, the biggest one-week gain since the week ended Sept. 22, the report showed.
The department released its weekly report on petroleum inventories a day later than usual because of the New Year's holiday on Jan. 1.
The department said yesterday it published incorrect oil- supply data on Dec. 20 and that the error will not be corrected. The department reported on Dec. 28 that midwestern supplies in the week ended Dec. 22 were 17 percent higher at 80.5 million barrels and total U.S. supplies were at 329.1 million, 3.6 percent higher than actual.
U.S. crude-oil inventories for that week plunged a record 17.8 million barrels, or 5.4 percent, department spokesman Jonathan Cogan said in a phone interview today. The previous record was 15.2 million barrels, or 4.5 percent, in the week ended Jan. 1, 1999.
Brent crude oil for February settlement fell $1.85, or 3.2 percent, to $56.11 a barrel on the London-based ICE Futures exchange. Futures touched $55.87 a barrel, the lowest since Dec. 28, 2005.
