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Oil Extends Tumble From Three-Month High

cnbc.com
Friday, 22 Dec 2006 | 2:27 PM ET

Oil slipped further on Friday from a three-month high hit earlier in the week, as forecasts called for unseasonably warm weather to linger in the U.S. Northeast.

U.S. crude settled down , extending a tumble from Wednesday's brief climb over $64, which was the highest since late September. London Brent crude finished

The U.S. National Weather Service on Thursday joined a chorus of private forecasters predicting that mild weather would persist into January. Above-average temperatures have
lowered demand for heating fuels.

Temperatures in the U.S. Northeast, the biggest heating oil consuming region in the world, are expected to average as much as 14 degrees Fahrenheit above normal into early next week, according to forecasters DTN Meteorlogix.

U.S. crude inventories were expected to rebound next week as Gulf Coast shipping delays eased following a week of intermittent disruptions due to fog.

But commercial crude and refined product stocks combined were 400,000 barrels lower than the same time a year ago, a sharp fall from a 76 million barrels year-on-year surplus three months ago.

"(A) rebound in demand growth against limited supply growth created the largest October/ November U.S. inventory draw on record," Goldman Sachs said in a report.

The investment bank reaffirmed its positive view on next year but cut its average price forecast by $3 to $72.50 a barrel, still among the industry's highest targets.

A downward revision in U.S. third-quarter economic growth to 2% -- from a previously reported 2.2% annualized rate -- sent a bearish signal for fuel demand growth from the world's top consumer.

Political tensions kept troubling the supply outlook from Nigeria, where further unrest is anticipated in the run-up to presidential elections in April.

Militants stormed an oil facility operated by Total in the delta's Rivers State on Thursday, but production at the 35,000 barrels-per-day Obagi field was unaffected.

Supply cuts by OPEC starting on Nov. 1 have already tightened the world market, according to the International Energy Agency, an adviser to industrialized countries. OPEC plans to cut output by a further 500,000 bpd from Feb. 1.

IEA Chief Economist Fatih Birol said on Friday oil prices would likely rise next year without an increase in supply.

"We should not be surprised to see higher prices next year if oil producing countries do not raise their production," he told Reuters on the sidelines of a conference in Turkey.

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