The Star - 18/5/2006
Oil prices extended losses Thursday in a sell-off triggered by rising gasoline supplies in the U.S. and concerns that high oil prices have weakened demand.
Light, sweet crude for June delivery fell 28 cents to US$68.41 a barrel in Asian electronic trading on the New York Mercantile Exchange.
The contract Wednesday settled at US$68.69 a barrel, a decrease of 84 cents.
U.S. government data released Wednesday showed the domestic supply of gasoline rose for the third straight week amid stagnating demand.
The Department of Energy said in its weekly petroleum supply snapshot that domestic gasoline supplies grew by 1.3 million barrels last week to 206.4 million barrels.
While that is 3.5 percent below year-ago levels, it comes at a time when gasoline consumption appears to be flattening out as a result of high prices.
The department said U.S. gasoline demand over the past four weeks was 9.2 million barrels per day, or about even with the same period last year.
"The 'soup du jour,' so to speak, of the oil market has been the potential economic damage of high oil prices, and the concern that demand has weakened or could weaken,'' said energy analyst Victor Shum of Purvin & Gertz in Singapore.
However, Shum said it remained too early to tell if demand had indeed been significantly hurt by high oil prices, which are still about 40 percent higher than a year ago.
"We can't tell what the actual gasoline demand situation in the U.S. is like until the summer driving season kicks in,'' Shum said.
The peak demand season usually begins with the Memorial Day holiday, which this year falls on May 29.
Other data showed crude oil inventories slipping by 100,000 barrels last week to 346.9 million barrels, or 4.7 percent higher than last year, and distillate fuel stocks also falling by 100,000 barrels to 114.6 million barrels, or 7 percent higher than last year.
Lending to the weakness in oil prices was a monthly report from the Organization of Petroleum Exporting Countries, which slightly reduced its demand forecast for 2006 and predicted that the world's crude-oil supply cushion would rise significantly by the end of the year.
But analysts say the market's decline is unlikely to be sustained over the long-term, amid persistent anxieties about the West's nuclear standoff with Iran, supply disruptions in Nigeria and the upcoming Gulf of Mexico hurricane season.
"In the very near term prices may head lower on the U.S. inventory report, but there remain many issues and potential problems ahead, and because of that you can count on traders and financial investors to come back into the market,'' Shum said.
Meanwhile, gasoline futures fell 0.36 cent to US$1.9715 a gallon (3.8 liters) while heating oil prices lost 0.47 cent to US$1.9165 a gallon. Natural gas futures fell 7.9 cents to US$6.05 per 1,000 cubic feet.