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  • Nov 3rd, 2005
  • Comments Off on Oil meanders sub-$60 on mild temps, awaits US data
Oil prices moved sideways just below $60 a barrel on Wednesday, with traders on the sidelines ahead of US inventory data expected to show a rise in crude stocks.

Warmer than usual weather in the US Northeast has dampened demand for heating fuels while another hurricane-hit US refinery cranked back into action, undermining any attempt to rebound from the three-month low touched a day ago.

US light crude oil prices eased 3 cents to $59.85 a barrel in Asia trade, after adding 9 cents on Tuesday. IPE Brent was down 15 cents at $58.22 a barrel.

"According to weather forecasts, temperatures are not likely to be colder than normal. We don't have any reason to buy (oil futures) now," said Testy Emory, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

Temperatures in the US Northeast, the world's biggest heating oil market, were expected to average 2-10 degrees above normal on Thursday and 4-14 degrees above normal from Friday to Saturday, private forecaster Meteorlogix predicted.

Against that mild backdrop traders will look towards US government data to provide market direction and fresh clues on the state of oil demand in the world's top consumer, which has been running below year-ago levels.

A Reuters survey of analysts predicted a build of 2.2 million barrels per day (bpd) in crude stocks last week and a 0.9 million barrels build in gasoline inventories, but a 0.8 million barrels drawdown in distillates, including heating oil.

With overall demand easing and temperatures mild, refiners will have more time and opportunity to build up inventories ahead of the winter, when consumption peaks, analysts say.

Supplies should also rise as more plants return to operation following hurricanes Katrina and Rita, which at one point had cut a full quarter of US fuel production capacity.

Exxon Mobil said on Tuesday it had begun start-up of its 190,000 barrels per day refinery in Chalet, Louisiana, leaving only three refineries completely shut.

Offshore, some 1.0 million barrels per day or 66.67 percent of the Gulf of Mexico's crude production stayed shut after damage from the storms with some officials saying a full recovery could be as distant as next March.

Prices have plunged more than $10 a barrel from their end-August record high of $70.85 a barrel, but many traders are wary of pushing them much lower given forecasts for a harsher than usual winter, stoking demand for heating fuels in low supply.

"We have to carefully monitor natural gas situations in the Gulf area," Emory said. "The production of natural gas there is not recovering that much. Production of natural gas could affect prices when temperatures get much colder."

Stubbornly high natural gas prices may drive some industrial or domestic users to use heating oil instead. Natural gas futures have risen 2 percent over the past two months, while heating oil has fallen nearly 14 percent.

Potentially tightening pre-winter fuel supplies, oil major Shell was slowing production on Tuesday at its Rotterdam refinery after its workers launched a strike on Monday over pension demands, the first by Shell workers in the Netherlands since 1979.

The 418,000-bpd Penis refinery, Europe's biggest, is a major supplier of transport and heating fuels to Europe and exports gasoline to the United States.

Copyright Reuters, 2005


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