- The Washington Times - Tuesday, November 9, 2004


Crude oil futures tumbled below $48 a barrel yesterday, closing at their lowest level in seven weeks, on rising expectations that the U.S. supply of transport and home-heating fuels will be adequate this winter.

Light crude for December delivery dropped $1.72, or 3.5 percent, to settle at $47.37 per barrel on the New York Mercantile Exchange as traders awaited the U.S. government’s upcoming petroleum supply report. It was the cheapest closing price since Sept. 21, when Nymex oil finished at $47.10 per barrel.

While oil prices are down roughly 14 percent from the Nymex settlement high of $55.17 late last month, relief at the retail level might not come soon enough for consumers.

The Energy Department yesterday raised its earlier estimate for home heating costs over the next five months.

Homeowners in the Northeast will pay 37 percent more for heating oil this winter than a year earlier and natural gas users in the Midwest will see costs rise 15 percent, the department said in its monthly report.

The average cost of natural gas per household will rise to $1,003 from $870 in the winter of 2003-04. That estimate is the same as last month’s outlook.

The average residential winter heating-oil cost will be $1,309, up from $953 last winter, the department’s Energy Information Administration predicted in its Short-Term Energy Outlook. The estimate is up 7 percent from last month’s forecast.

Analysts also said it is too soon to definitively say the worst is over for fuel-hungry motorists, homeowners and businesses.

“That’s the question. Is this uptrend over?” said Tom Bentz, a broker at BNP Paribas Commodity Futures in New York.

“I’m not convinced yet that the highs are in. They could be,” Mr. Bentz added, “but I’d like to see some more evidence” that the nation’s supply of crude and heating oil will be sufficient this winter.

An important set of evidence will be revealed to the market today, when the Energy Department releases its weekly petroleum supply data.

Traders appeared to be betting yesterday that the data will show increases in domestic inventories of crude oil and distillate fuel, which includes heating oil, diesel and jet fuel.

James Cordier, head trader at Liberty Trading Group Inc. of Tampa, Fla., said today’s supply report — and, perhaps more importantly, the market’s reaction to it — could “decide energy prices for the rest of the year.”

The nation’s oil supply is about 1 percent below year-ago levels but has been growing steadily over the past six weeks. The supply of distillate fuel, meanwhile, is 12 percent below year-ago levels and is a major reason why heating oil has been so expensive lately.

The average retail price of heating oil was $2.06 per gallon nationwide last week, compared with $1.38 a gallon a year earlier.

The Energy Department predicted yesterday that residential heating oil costs would average $1.88 per gallon in the October-March period, an increase of 37 percent from a year ago. At the start of last month, the agency had forecast a 28 percent increase, but that was before oil prices surged above $55 a barrel.

Since then, prices have come down as extra barrels of crude arrive in the U.S. market from abroad and daily oil output in the Gulf of Mexico recovers from damage caused by Hurricane Ivan in mid-September.

Traders are also increasingly confident that U.S. refineries — coming out of pre-winter maintenance — will have enough time to ramp up production of heating oil ahead of the winter, staving off another surge in prices.

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