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Oil prices retreat on profit-taking

A Pakistani petrol attendant, left, fills the fuel tank of a motorcycle at a service station in Karachi yesterday. Pakistan's oil marketing companies have announced an increase of 7 to 12 percent in the prices of petroleum products. The price of light, sweet crude oil dropped US$0.55 to US$66.24 a barrel in New York on Friday. PHOTO: AFP

Oil prices pulled back on Friday as traders took profits from surges earlier in the week, but jitters remained over the slow recovery of oil facilities on the Gulf Coast and the possible impact on winter fuel supplies.

Light, sweet crude for November delivery on the New York Mercantile Exchange fell US$0.55 to settle at US$66.24 a barrel.

Heating oil for October slipped US$0.0574 to settle at US$2.0673 a gallon, while October gasoline tumbled US$0.1135 to settle at US$2.1381 a gallon. October heating oil and gasoline contracts expired at the end of trading Friday, which was also the last day of the third quarter -- another reason why some traders were selling.

Brent crude for November on London's International Petroleum Exchange fell US$0.36 to settle at US$63.48.

"The market is just breaking down a bit after rallying in the middle of the week," said BNP Paribas Commodity Futures analyst Tom Bentz, adding that big price swings have become normal in recent volatile oil markets, and aren't always driven by big news or new data.

Crude prices are up more than 3 percent from last Friday, when Hurricane Rita was barreling through the Gulf of Mexico, while heating oil is 6 percent higher from a week ago and gasoline is up more than 2 percent.

Although gasoline futures fell on Friday, gasoline spot prices are still extremely high, as oil companies are willing to pay top dollar to keep up supplies to meet consumer demand. Demand has faltered in the wake of Katrina and Rita but could revive as the Gulf region recovers, analysts said.

Adding to gasoline supply concerns is an ongoing strike at a Total SA refinery in France that has halted production for 11 days. Total is Europe's largest gasoline exporter to the US, with an output of about 325,000 barrels a day.

The average US retail price of a gallon of gasoline was US$2.84 on Friday, up about 3 cents from a day earlier, according to AAA.

Meanwhile, November natural gas fell US$0.2750 to settle at US$13.921 per million British thermal units, after hitting a settlement record of US$14.196 a day earlier. Natural gas futures have risen about 18 percent since Katrina hit one month ago, and are about 74 percent higher than they were two months ago.

The US Energy Department said on Thursday that natural gas inventories increased by 1.5 billion cubic meters to 81.7 billion cubic meters in the week ended Sept. 23 from the week earlier, but remained about 4 percent below year-ago levels.

Natural gas supplies have been a real concern in the oil markets as the Gulf region struggles to recover from hurricane damage and the winter months approach. The US' ability to import liquefied natural gas is limited, unlike crude oil, which can be imported from other countries and taken from the US government's emergency reserve.

Oil and gas production in the Gulf region has improved only slightly in the past few days. As of Friday, 97.8 percent of oil output, or 1.47 million barrels of oil per day, and 79.8 percent of natural gas production, or 2224.8 million cubic meters, remained blocked, the Minerals Management Service said.
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