ICE Brent falls below $65/bbl, its lowest level since March 2006

ICE Brent falls below $65/bbl, its lowest level since March 2006

London (Platts)--11Sep2006

The front-month October Brent futures contract was trading below the
magical $65/barrel level as the market appeared to be bracing for more bearish
fundamentals as well as noting that geopolitical events were fading into
the background, brokers said.
The front-month October futures contract was 46 cents lower at
$64.87/barrel having been as low as $64.76/barrel earlier in the day. Refco
noted that prices had broken through some critical support levels Friday with
prices at their lowest level since the end of March 2006. Brokers were looking
for support levels between $64.60/barrel and $64.65/barrel on the October
contract.
"The storm concerns are easing day by day, refinery crack spreads are
also beginning to weaken (citing weakness in NYMEX heating oil and gasoline
cracks)," a broker at Refco said.
Some OPEC ministers, gathering in Vienna, appeared to be concerned about
the massive drop in oil prices which have shed around $13/barrel since August.
The Venezuela oil minister, Rafael Ramirez said "we are looking to see if
[prices] are adjusting themselves or if it is a situation that is going to
remain in the long run. We don't want the price fall to [continue] and we will
take any action to avoid that happening,".
However, despite the concern about the falling prices, Qatar's Abdullah
al-Attiyah said ministers were still on course to agree to leave the group's
formal output ceiling of 28 million b/d unchanged at their formal conference
later in the day. Iran's oil minister Kazem Vaziri Hamaneh echoed this
sentiment adding "I don't think there will be a change in the quotas at this
meeting." Oil brokers also doubted any cut in production at the moment citing
typically strong demand for the last quarter (Q4) of the year.
Reports of progress in last-ditch talks on Iran's nuclear program also
helped ease some concerns about the possible imposition of sanctions on the
country, the fourth-biggest producer of crude.
In the latest Commitment of Traders report, non-commercials or hedge
funds continued to shed length across the complex with the funds length
dropping by a further 11,738 contracts in crude oil leaving them long by just
69,597 contracts. In NYMEX gasoline and heating oil, the non-commercial funds
were also shedding length with total gasoline contracts amounting to 1,125 on
the long side and 7,029 for heating oil. The hedge funds were sticking to the
long side on RBOB futures by 10,741 contracts, according to the latest COT
report.
--Paul Wightman, paul_wightman@platts.com

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