ICE Brent hits lowest level this year ahead of US stock data

London (Platts)--4Oct2006

ICE Brent crude futures hit their lowest level this year on Wednesday as
traders awaiting the latest US stock data reacted to continued ample supplies,
high inventory levels and fears of an economic slowdown in the US, the world's
biggest oil consumer.
Shortly after 0600 GMT, Brent for November delivery slumped to
$57.78/barrel, the lowest level since December 30, 2005. Prices subsequently
recovered slightly to stand at $58.39/barrel at 0920 GMT, down 4 cents from
Tuesday's settle.
ICE WTI for November was trading down 13 cents at $58.55/barrel at
the same time.
"There is a complete lack of geopolitical news in the market at the
moment, stripping all premium from the price of crude and it is exposed to
technical realities," said one London-based broker.
"With concern over the health of the US economy having an impact on crude
demand it is understandable why there is this sell-off and a rush to abandon
positions," he said.
ICE Brent has now fallen more than $4.43 this week from a high on Monday
of $62.82/barrel, and has slumped by more than 25% from an all-time high of
$78.65/barrel on August 8.
On Tuesday, all of the support gathered on the downside as crude tumbled
over two dollars in the late afternoon.
Scant support in the form of marginal production cuts by OPEC members
Nigeria and Venezuela was blown away as traders abandoned long positions in
the US as WTI failed to hold onto significant technical resistance levels, one
trader said.
Brent also fell through key support levels, most notably the
$59.30/barrel level that had been tested several times in recent days.
"The market did not buy into the production cuts by some OPEC members
because they are insignificant compared with the awesomely high stock levels
in the US and if demand does come off like people expect, what is to stop
Brent slipping below $50?" said one broker.
US oil inventory data due to be released Wednesday by the US Energy
Information Administration and American Petroleum Institute are expected to
show a 700,000 barrel draw in commercial crude stocks, analysts surveyed
by Platts said Tuesday.
Analysts expected refinery runs to dip by 0.6% to 91.8%, as refineries
enter into planned maintenance.
Gasoline stocks are expected to build by 1 million barrels, after a
6.3 million barrel build reported last week by the EIA.
Distillate stocks, already at their highest level since January 1999,
are projected to rise by another 1.3 million barrels, according to analysts.
--Jonathan Davies, jonathan_davies@platts.com

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