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Light, sweet crude for July delivery fell 29 cents to $70.07 a barrel
in morning Asian electronic trading on the New York Mercantile
Exchange. On Monday, the contract fell $1.27 to settle at $70.36 a
barrel.
"The traders are looking for clues indicating demand trends," said
Victor Shum, a Singapore-based energy analyst with Purvin & Gertz.
"One thing they'll look at is the U.S. weekly inventory report that
will come out tomorrow."
"The general market expectation is that inventories will increase
again, as product demand in the United States appears to be relatively
flat," he said.
Earlier this week, oil prices remained volatile on worries that
Tropical Storm Alberto would morph into a hurricane, as memories of
2005, one of the most destructive hurricane seasons on record,
continued to haunt traders. Hurricanes Katrina and Rita swept some
offshore rigs from their moorings, virtually shuttered production in
the Gulf and damaged refineries in Louisiana and southeast Texas.
But those fears remained unfounded as Alberto had only a limited
impact on oil and gas drilling operators in the Gulf of Mexico.
Now, traders are looking ahead at Wednesday's inventory report, which
is expected to show a burgeoning amount of crude supplies.
In the previous weekly petroleum report, the Energy Department said
U.S. crude-oil stocks grew last week by 1.1 million barrels to 346.6
million barrels, or 4 percent above year-ago levels. Gasoline
inventories grew by 1 million barrels to 210.3 million barrels, or 2.5
percent below year-ago levels.
The commercial supply of distillates, which include heating oil and
diesel, increased by 1.8 million barrels to 120.7 million barrels, or
8.5 percent more than a year ago.
Gasoline futures dropped marginally Tuesday to $2.1153 a gallon, while
heating oil prices were down slightly at $1.9900 a gallon. Natural gas
prices rose a cent to $6.240 per 1,000 cubic feet.
Still, analysts say persisting geopolitical problems are likely to
temper a further decline in oil prices.
"The market will likely trade around a tight band of the high $60s and
the low $70s," Shum said.
Worries over Iran's confrontation with the West over its nuclear
program eased a bit after Iran said it accepted some parts of a
Western offer aimed at getting the country to halt its nuclear program
while it rejected other parts.
At the same time, the head of the U.N. atomic watchdog agency told a
35-nation meeting Monday he had made little progress in his probe of
suspicious aspects of Iran's nuclear program.
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