WASHINGTON -- Oil prices fell yesterday after government data showed US inventories of crude grew last week, surprising many traders and analysts who had expected supplies to shrink due to lingering output problems caused by Hurricane Ivan.
Contributing to the drop in prices was word of a tentative agreement between the Nigerian government and the leader of a militia group that had threatened to target foreign oil firms and their workers.
Light sweet crude for November delivery fell 39 cents to settle at $49.51 per barrel on the New York Mercantile Exchange, after rising above $50 a barrel Tuesday.
Meantime, the price of natural gas futures surged, rising by nearly 9 percent in a run-up that traders said was driven more by technical factors than supply-demand fundamentals.
Natural gas for November delivery rose 56 cents to $6.911 per 1,000 cubic feet.
Ed Silliere, vice president of risk management at Energy Merchant in New York, said the spike was due to a wave of short-covering, whereby investors who had incorrectly expected natural gas prices to fall cover their bets by buying and causing futures to rise further.
Government and industry analysts had cautioned a week ago that large amounts of oil would eventually arrive in the United States, as tankers that were delayed by a string of hurricanes began making their deliveries.
The Energy Department said yesterday that commercial inventories of oil grew by 3.4 million barrels last week, while oil imports averaged 9.9 million barrels per day -- a rise of 1.5 million barrels a day from the prior week, the agency said.
The nation's supply of crude is still 4 percent below last year's level at 272.9 million barrels. With fears of international supply disruptions at a time when the world's excess production capacity is minimal, many analysts expect oil prices to remain high -- above $40 a barrel -- into 2005.