Crude prices fall to near $50 a barrel
Drop fueled by rise in US supply, easing of heating oil fears
Oil futures prices sank to their lowest level in nearly a month yesterday on a continuation of the sell-off sparked last week by rising US supplies of crude and easing fears about the refining industry's ability to satisfy heating oil demand.
The downward momentum appeared to overshadow concerns traders had about a possible strike in oil-rich Nigeria and a new setback to Russian oil giant Yukos, which was reportedly hit with $10 billion in new tax claims yesterday.
December crude futures declined by $1.63 to settle at $50.13 per barrel on the New York Mercantile Exchange -- the lowest closing price since Oct. 4, when futures settled at $49.91 per barrel. Prices had fallen as low as $49.30 a barrel in intraday trade. In London, December Brent crude futures fell $1.92 to $47.06 per barrel.
''We could move a couple of bucks more on the downside," said BNP Paribas Futures trader Tom Bentz. Bentz added that worldwide oil supplies remain tight and therefore, ''I'd be a little cautious" about declaring the beginning of the end of high prices. ''The reality is that not a lot has changed fundamentally," he said.
Despite the recent declines in crude prices, the retail price of gasoline inched higher last week to average $2.03 per gallon nationwide, the Energy Department reported yesterday.
The government survey said the average price nationwide of regular grade unleaded gasoline rose 0.2 cent last week to $2.03. Prices are 49.9 cents higher than a year ago.
As of yesterday, regular self-serve unleaded gasoline was averaging $2.03 in Massachusetts, according to the American Automobile Association daily survey. That was up 11 cents from a week ago and 40 cents from the end of October a year ago.
Average nationwide prices peaked at $2.06 a gallon during the week ended May 22.
Aaron Kildow, a broker with Prudential Financial Inc. in New York, said yesterday's slide was magnified by selling among institutional investors, such as mutual funds, who had to cover earlier bets that prices would rise. December heating oil futures plummeted 5.65 cents to $1.41 per gallon on Nymex, where gasoline futures fell 3.77 cents to $1.30 per gallon. Natural gas for December delivery dropped 0.5 cent to $8.72 per 1,000 cubic feet.
In Massachusetts, home heating oil reached its highest price in years, averaging $2.07 a gallon at full-service dealers, 75 cents higher than levels of a year ago, according to the state Division of Energy Resources.
Last week, oil prices fell from record closing prices on Nymex after the Energy Department said US crude supplies had increased by 4 million barrels to 283.4 million barrels -- roughly double what Wall Street was expecting. Also, data maintained by the Minerals Management Service showed a recovery in industrywide oil and natural gas production in the Gulf of Mexico, where operations have been snagged since mid-September due to Hurricane Ivan.
That the market chose to focus last week on rising oil supplies instead of shrinking heating oil inventories suggested a shift in traders' psychology. China's move to cool its red-hot economy by raising interest rates also eased pressure on oil prices.
While crude prices are still up by more than 70 percent from a year ago, they would need to surpass $90 per barrel to approximate the record high, in inflation-adjusted terms, set in 1980. A record Nymex closing price of $55.17 per barrel was reached Oct. 22 and matched Oct. 26.
Oil prices briefly rose yesterday morning on word that Nigeria's main labor union had called for a nationwide strike Nov. 16 at the country's largest petroleum producer -- Royal Dutch/Shell Group -- in a protest over local increases in fuel costs. Royal Dutch/Shell opened court action yesterday to block the threatened strike but lost a first-round bid for an interim injunction quelling the unions. Nigeria exports around 2.5 million barrels of oil daily.
In Russia, tax authorities raised Yukos' total bill to more than $17.6 billion, the Interfax news agency reported yesterday. The Tax Ministry hit Yukos with a fresh bill for 2002 of $6.7 billion, while its biggest subsidiary -- Yuganskneftegaz -- received new claims amounting to more than $3 billion for 2001 and 2002.
Globe staff writer Peter Howe contributed material to this report.