Oil prices fall nearly 5% to below $53 a barrel
Eased fears over supplies of winter fuel drive decline
Oil futures prices sank nearly 5 percent yesterday, dropping below $53 a barrel, as concerns about tight winter-fuel supplies eased, at least temporarily, and traders turned their attention to rising US inventories of crude.
Analysts said the market was also anticipating an eventual reversal in what has been a steady decline in the US supply of distillate fuel, which includes heating oil.
But if the sell-off was triggered by a shifting analysis of market fundamentals, it was magnified by speculators rushing to offset earlier bets they had made that oil prices would move higher, brokers and analysts said.
Crude for December delivery fell $2.71, or 4.9 percent, to settle at $52.46 a barrel on the New York Mercantile Exchange. The record Nymex settlement price of $55.17 was reached Friday and matched Tuesday. In London, Brent crude futures slid $2.11 to settle at $49.45 per barrel on the International Petroleum Exchange.
Prices are up roughly 75 percent from a year ago, but they would need to surpass $90 per barrel in order to approximate the all-time peak, in inflation-adjusted terms, set in 1980.
Oil prices initially rose yesterday after the Energy Department reported that inventories of distillate had declined for a sixth straight week. But traders said a sharper-than-expected increase in the nation's crude oil supply turned things around.
US inventories of crude oil grew by 4 million barrels to 283.4 million barrels last week, the government said, an increase about twice as large as Wall Street was expecting.
The nation's inventory of distillate fuel, which includes heating oil and diesel, contracted by 2.4 million barrels to 116.6 million barrels, or 12 percent lower than a year ago.
Heating oil for November delivery plummeted 7.26 cents to settle at $1.4955 per gallon on Nymex, where gasoline futures dropped 7.64 cents to $1.3361 per gallon. Natural gas futures settled at $7.69 per 1,000 cubic feet, a decline of 71.2 cents.
Tom Bentz, a trader at BNP Paribas Futures in New York, said it was not yet clear to him whether yesterday's slide was the start of a larger trend or a one day technical correction that could be followed by moves higher, as has happened throughout the year.