Oil prices continue three-day slump, Brent below $40

Oil prices continue three-day slump, Brent below $40

London (Platts)--3Dec2004


Benchmark global oil prices continued to fall Friday, extending sharp losses
seen over the previous two days as fears of winter supply shortages receded.
Brent futures on London's IPE fell below the $40/bbl threshold and light crude
futures on the New York Mercantile Exchange also fell by as much as $1/bbl
before rebounding somewhat, bringing the cumulative losses since Wednesday to
over $8/bbl. At 1744 GMT, January Brent stood at $39.50/bbl, down 65 cts on
the day, while January NYMEX crude was down 45 cts at $42.80/bbl. With the
psychological $40/bbl support level broken on the IPE, "Brent crude may well
stay below this level for the end of week close," said one trader. The
sell-off was triggered initially on Wednesday by the latest weekly inventory
report from the US Department of Energy showing builds in crude, gasoline and
heating oil stocks. Before the data was released, NYMEX crude had been trading
at over $50/bbl.

The DOE data showed a 2.3-mil bbl build in US distillate inventories, greater
than analysts had expected and causing fears of a possible shortage of heating
oil during the peak demand winter season to recede. Heating oil prices have
also fallen since Wednesday on the back of above average temperatures in the
Northeast US, the key consuming region. Traders have also been looking ahead
to next week's OPEC meeting in Cairo, when the cartel's ministers are due to
meet to review output levels. In recent days OPEC president Purnomo
Yusgiantoro and the oil ministers of Algeria and Nigeria have all said they do
not expect the group's current 10-member output ceiling of 27-mil b/d to be
altered. In recent months OPEC has been pumping well above formal quotas in a
bid to cool record high oil prices.

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