Crude oil prices slide by over one dollar

05-Oct-05

Crude oil prices have slid by over one dollar on Tuesday, despite 90% of the Gulf Coast region's daily oil production and 72% of its daily natural gas output, shut. This indicates that market uncertainties have eased due to a seasonal soft patch, with the summer driving season over and the winter heating season yet to begin. The psychology of the market may also be shifting as a result of the Bush administration's recent requests of Americans to conserve fuel. Light sweet crude for November delivery fell by US$1.57 to settle at US$63.90 on the New York Mercantile Exchange. In London, November Brent futures slid by US$1.58 to settle at US$61.22 a barrel on the International Petroleum Exchange. The market awaits a U.S. petroleum inventories report due later in the week for fuller details of the impact of hurricanes Katrina and Rita. A major issue is the loss of Gulf Coast refining capacity needed to manufacture gasoline, heating oil and jet fuel. 12 refineries accounting for about 3 million bpd, or 18% of U.S. refining capacity remain shut in the aftermath of Katrina and Rita. The second cause of concern is the potential for a prolonged loss of natural gas output. Unlike oil, the U.S. government does not have an emergency stockpile of natural gas and the country does not have the infrastructure in place to substantially increase imports.