Sun, Oct 16, 2005 - Page 10 News List

Oil prices lower again over slow recovery in Gulf

LONG ROAD BACK The hurricanes that assaulted the Gulf of Mexico are still being felt in the market despite the good progress being made at refineries


Oil prices ended only moderately lower after falling sharply on Friday, as word of disappointing recovery in Gulf of Mexico oil and gas output prompted traders to cover positions.

The November crude futures contract on the New York Mercantile Exchange ended US$0.45 lower at US$62.63 a barrel, well off the intraday low of US$61.20 a barrel.

November Brent futures on London's International Petroleum Exchange closed with a loss of US$0.79 at US$59.35 a barrel.

Among petroleum products, gasoline made the most impressive recovery.

Gasoline for November delivery on the Nymex closed US$0.93 lower at US$1.7486 a gallon (3.78 liters), a sharp rebound from an intraday low of US$1.65 a gallon. November heating oil finished US$0.0469 cents lower at US$1.95 a gallon after hitting an intraday low of US$1.9025 a gallon.

Trading was light, with volumes truncated by the absence of many traders out, extending the weekend after Thursday's observance of the Jewish holiday of Yom Kippur.

The late bounce in prices came after the federal Minerals Management Service reported in a daily update a slight uptick in Gulf of Mexico oil production, putting the amount of shut-in output at about 1 million barrels a day, or 67.3 percent of total daily output, down slightly form 68.8 percent seen on Thursday.

There was virtually no improvement in natural gas output, with some 5.65 billion cubic feet (160 million cubic meters) a day of output off line, or 56.5 percent of the total, the MMS said in a daily update.

The slow pace of recovery contrasted sharply with the rapid progress Gulf Coast refiners have made in restarting hurricane-shuttered units.

"The report shows that we still have a long way to go to get back to normal," said Phil Flynn, an analyst at Alaron Trading Corp. "People are disappointed that things are not coming back online as quickly as they expected."

Reports of rising refinery output and weak demand continued to weigh on the market, however.

The federal Energy Information Administration (EIA) reported on Thursday that US refinery utilization jumped by 5.1 percentage points last week to about 75 percent of operable capacity after plunging nearly 17 percent in the aftermath of Hurricane Rita.

At the same time, gasoline demand was down 57,000 barrels a day on the week at 8.783 million barrels a day, a 1.5 percent decline on the year, the EIA said. In the four weeks ended Oct. 7, gasoline demand averaged 8.882 million barrels a day, down 2.4 percent on the year, according to the report.

Mike Fitzpatrick, an analyst at brokerage Fimat USA in New York, said weak demand has been at the forefront of the market for several weeks now.

"There is nothing new there," he told Dow Jones Newswires. "People didn't just wake up to it last night. They've been selling it for a while."

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