Crude oil futures prices fell 2.2% to an 11-day low of $90.05 a barrel Friday amid sliding equities and strength in the dollar.
Analysts said broad global economic concerns raised doubts about the strength of world oil demand at a time when U.S. crude oil inventories are at their highest level for this time of year since 1982, when government record keeping began. Prices of reformulated gasoline blendstock and heating continued precipitous declines on signs of weak demand and expectations that U.S. refiners will soon be boosting output as seasonal maintenance work ends.
The supply-demand fundamentals tilted bearish as the dollar firmed on disappointment that the European Union's two-day summit ended Friday without major news to renew investor confidence in Europe's financial system. Spain's prime minister signaled that Madrid wasn't ready to ask for a bailout. The stronger greenback makes dollar-based commodities like crude oil more expensive for buyers using foreign currencies.
"There's just a general lack of confidence," said Gene McGillian, broker and analyst at Tradition Energy. "We're following equities down. It seems crude is reattaching itself to the broader market."
Light, sweet crude oil for November delivery on the New York Mercantile Exchange fell $2.05 a barrel, to settle at $90.05. The decline was the biggest since Oct. 3 and put crude at its lowest level since Oct. 8. Crude bounded early in the session, but found little follow through and sellers drove it down, snapping a recent pattern. Crude futures were so tightly calibrated in a narrow range over the week through Thursday that the November contract posted a net rise of just 3 cents a barrel.
Still traders see Nymex crude stuck in the middle of slim range of $88-$93 a barrel in the near term, where it's been for the past month.
On the InterContinental Exchange, North Sea Brent crude oil for December delivery fell 2%, or $2.28 a barrel, to $110.14 a barrel. The decline was the sharpest since Oct. 3 and put Brent at the lowest price since that date. Brent was pressured by expectations that the Buzzard oil field, the largest in region, will be back in operation this weekend after prolonged maintenance work.
U.S. gasoline inventories aren't far above four-year lows set in recent weeks, but signs of sluggish demand and rising supplies are slashing prices.
The American Petroleum Institute said Friday that U.S. oil demand in September fell 3.8% from a year earlier, to 18.2 million barrels a day, the second-lowest demand for the month since 1996. Gasoline demand fell 4% year-on-year in the month, while demand for distillate fuel (diesel/heating oil) was 4% below the September 2011 level.
Distillate stocks are at 12-year lows nationwide, but in the Northeast, where heating oil use is concentrated, inventories are the lowest since government record keeping began in 1990. Right now, traders said sluggish demand for diesel is having more impact on prices than is hope for stronger winter heating demand.
November reformulated gasoline settled 4.88 cents, or 1.8%, lower at $2.6963 a gallon, the lowest price since July 2. Prices fell 8.9%, or 26.3 cents over the past seven sessions. Nymex price data show front-month gasoline hadn't fallen for seven straight days since the summer of 2011, as the August contract was replaced by September as the front-month contract. Gasoline futures 6.8% in the week was the biggest weekly drop since the week ended Sept. 23, 2011.
November heating oil fell 1.6%, or 5.21 cents, to settle at $3.1345 a gallon. That was the biggest drop since Oct. 3 and put prices at the lowest level since then. Prices fell 12.26 cents, or 3.8%, in the past six sessions.
Copyright (c) 2012 Dow Jones & Company, Inc.
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