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OIL FUTURES: Crude Falls To 1-Mo Low On Weather December 27, 2006

Posted by notapundit in Economic News.

NEW YORK (Dow Jones)–Crude oil futures fell to a one-month low Wednesday as warm seasonal U.S. weather, which shows little signs of letting up, damps winter demand for heating oil.

While crude oil and heating oil both fell to new short-term lows in quiet trading, RBOB gasoline rallied as traders focused on low gasoline stockpiles and strong demand.

“The weather is the cause of a lot of the fall (in crude oil) and you can add in the light volumes” between the Christmas and New Year holidays, said Phil Flynn, an analyst and trader at Alaron Trading Corp. in Chicago.

“Gasoline is probably the most bullish of the energy complex,” Flynn said. “It was also a little oversold yesterday on light volumes, so some bargain hunters have come in.”

The front-month February light, sweet crude contract on the New York Mercantile Exchange fell 76 cents, or 1.2%, to $60.34 a barrel, the lowest settlement for a the front-month contract since Nov. 27. Brent crude on the ICE futures exchange fell 58 cents to $60.52 a barrel.

January heating oil fell 1.45 cents, or 0.9%, to $1.6088 a gallon, the lowest settlement since Oct. 31.

The National Weather Service is forecasting above-normal temperatures for most of the U.S. from Jan. 1 to at least Jan. 9. Heating oil demand is expected to be 23% lower than normal for the week ended Dec. 30, the NWS said on its Web site.

Front-month reformulated gasoline blendstock for oxygen blending, or RBOB gasoline, rose 1.73 cents, or 1.1%, to $1.5889 a gallon and unleaded gasoline was up 1.53 cents at $1.5875 a gallon. RBOB gasoline fell 3.6% Tuesday, sliding lower with heating oil and crude oil.

Gasoline prices are being supported by below-normal U.S. stockpiles amid record seasonal demand.

Traders are now focussed on the U.S. Department of Energy’s weekly inventory report, due 10:30 a.m. EST Thursday. The report is being issued a day later than normal because of the Christmas Day holiday Monday.

Analysts are expecting crude oil stockpiles to decline for a fifth-straight week, with a Dow Jones Newswires survey showing a mean forecast of a 1.3 million-barrel fall. Both distillate and gasoline stockpiles are seen rising by less than 1 million barrels each.

The U.S. isn’t the only place oil demand is being hit by the warm weather. Japan’s Nippon Oil Corp. (5001.TO) said Wednesday that it cut crude runs this month to avoid a buildup of kerosene stocks amid weak demand. Kerosene is widely used as a winter heating fuel in Japan.

Traders have shrugged off Iranian threats to use oil as a weapon in response to the U.N. Security Council voting to impose sanctions on Iran’s nuclear industry.

“Sanctions did not cover oil exports and Iran made no specific threat to limit sales because of them,” said John Kilduff, an analyst at brokerage Fimat USA. “Supply disruptions will need to be seen as imminent for prices to break out of the current range.”

Iranian Oil Minister Kazem Vaziri Hamaneh said Tuesday that Iran reserves the right to resort to oil as a weapon, if and when necessary, but that the need hasn’t yet arisen and that consumers needn’t worry about Iranian oil supplies after the U.N. Security Council voted to impose sanctions on Iran’s nuclear industry.

Following are prices for selected Nymex and ICE contracts and their comparison to values at the prior day’s settlement. Highs and lows include levels hit in overnight trade.

Prices for crude oil are in dollars a barrel and the change is in cents; prices for Nymex products are in cents a gallon and the changes are in points; prices for ICE gasoil are in dollars a ton and the change is in cents.

Nymex Prices:
Contract Settle Change Vs Low High
Feb crude oil 60.34 -76 60.25 61.34
Mar crude oil 61.56 -67 61.45 62.46
Jan heating oil 160.88 -145 160.36 163.30
Feb heating oil 165.28 -130 164.56 168.10
Jan gasoline 158.75 +153 156.75 161.50
Jan RBOB 158.89 +173 155.92 161.70
Feb RBOB 159.41 +44 157.50 161.50

ICE Prices:
Contract Settle Change Vs Low High
Feb ICE Brent 60.52 -58 60.39 61.59
Mar ICE Brent 61.47 -52 61.37 62.48
Jan gasoil 524.75 +550 520.50 529.75
Feb gasoil 530.25 +425 523.00 535.25

By Matt Chambers, Dow Jones Newswires


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