Oil prices dip by one dollar

30-Jun-05

Oil prices fell by almost one dollar on Wednesday, after Tuesday's dip of nearly two dollars a barrel. Oil prices dropped after the U.S. government data reported a rise in inventories of crude oil by 1.1 million barrels to 328.5 million barrels last week - an 8% spike above year ago levels. Light sweet crude for August delivery declined to US$57.30 a barrel in midday trade on the New York Mercantile Exchange. In London, Brent crude futures for August delivery dipped to US$56.20 a barrel on the IPE. Crude oil futures are trading about 60% above year-ago levels, but would still have to cross US$90 to reach the inflation-adjusted high set in 1980. One of the major causes for the rise in fuel supply is an increase in refinery utilization to 96.3%, a rise of almost 1.5% from the week before. Gasoline inventories grew by 300,000 barrels to 216.2 million barrels- 4% above year ago levels. USA's supply of distillate fuel, which includes diesel, jet fuel and heating oil, swelled by 1.7 million barrels to 113.2 million barrels. However, many feel that the surge in oil prices to US$60 a barrel was triggered by fears that producers will not be able to keep up with demand that will surge later this year. Output itself could be restricted by terrorism or some other factors. Can any aid from the supply side salvage the situation, which seems to be headed towards a scenario of global economic slowdown? In the past few weeks, OPEC has been blaming the price increase on the lack of refining capacity. However, many feel that OPEC is shunning some of its responsibility to maintain stability in world oil markets, which can definitely be rectified if more oil is brought onto the market.