Oil prices fall on rising supply from non-OPEC nations, mild US weather
Published by www.jamaicaobserver.com on Nov 21, 2006
Nov 21, 2006

NEW YORK (AP) - Crude oil prices slid yesterday, as the market gauged OPEC nations' commitment to cutting oil production and the effect of a mild US autumn on fuel supplies.

Also deflating prices, Iraq resumed pumping oil out of a pipeline in the north, where millions of barrels of oil have been blocked in this year due to sabotage.

Light sweet crude for January delivery fell 36 cents to $58.61 a barrel in early afternoon trading on the New York Mercantile Exchange.

On Friday, the December light sweet crude contract closed at $55.81 a barrel. It was the lowest settlement for the front-month crude contract since June 15, 2005. Friday was the last day for trading in the December contract.

"The concern for the market is how real is the cutback in OPEC supply, the rising growth in supply from non-OPEC nations and the fact that winter weather in the northern hemisphere has not turned cold," said Victor Shum, energy analyst with Purvin & Gertz in Singapore.

"Going forward, I think weather will remain a wild card," he said. "Also, in less than a month's time, OPEC will meet again, and there is already talk of further cuts, which has underpinned prices."

The Organization of Petroleum Exporting Countries, which is scheduled to meet in Nigeria on Dec 14, announced an output cut of 1.2 million barrels a day last month. But traders, skeptical that the Vienna-based cartel will stick to its pledge at a time of historically high prices, are holding prices back.

"We're in effect taunting OPEC with the lower prices. We're more or less daring them to cut output further. The market wants to induce OPEC to cut, and then everybody will reverse to the long side of the market, and see how high they can spike it," said Tim Evans, energy analyst at Citigroup Global Markets.

In other Nymex trading, heating oil futures dropped 0.94 cent to $1.6595 a gallon, while gasoline futures rose 0.53 cent to $1.5464 a gallon. Natural gas futures fell 16.1 cents to $8.020 per 1,000 cubic feet.

While US crude supplies remain ample, inventories of gasoline, diesel fuel and jet fuel have been on the decline for the past few weeks. That means the market could switch gears at any moment and bounce higher on tight supplies, Evans noted.

"Sentiment is a fickle thing - it can change dramatically, much more quickly than the fundamentals themselves can change," Evans said.

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