Oil prices plummet to 20-month low
A barrel of light, sweet crude for February delivery dropped $1.75 to $50.49 in midday trading on the New York Mercantile Exchange. Prices dropped as low as $50.05, their lowest since May 25, 2005, shortly after the inventory report?s release by the federal Energy Information Administration.
Crude prices this week have continued to inch closer to the psychologically important $50 barrier, and analysts said the market could cross the mark soon.
?I could tell you that it will be within the next couple of days or weeks, but this market doesn?t really dally,? said Peter Beutel of Cameron Hanover.
Plummeting oil prices have produced prices that are more tolerable at the pumps. In McMinnville, gas is below $2 a gallon, and as low as $1.86 on Sparta Street.
Motor gasoline inventories rose by 3.5 million barrels to 216.8 million, above analysts? expectations of a 2.6 million barrel rise. Distillate stocks, including heating oil and diesel fuel, rose by 900,000 barrels to 141.9 million barrels, compared with analysts’ expectations of a 1.3 million barrel rise.
The EIA said inventories for both gasoline and distillate fuels are at or above the upper end of the average range for this time of year.
?I think when you get these huge swings, you have to look not just at one week but look at the average over the last three weeks,? said Phil Flynn of Alaron Trading Corp.
In lowering expectations for this year as well revising last year’s figures downward, the Paris-based IEA cited mild winter weather that has crimped energy demand and weaker expectations for U.S. economic growth.
In its closely watched monthly oil market report, the energy watchdog forecast global oil demand growth this year of 85.77 million barrels a day, down 160,000 barrels a day. And it said oil demand growth last year was 120,000 barrels a day lower.
Saudi oil minister Ali Naimi, who earlier this week said he opposed calls from other OPEC members for new cuts in production, announced Thursday his country planned to increase its crude oil production capacity nearly 40 percent by 2009 and double its refining size over the next five years to keep pace with growing global demand.
Naimi blamed the sharp rise in global crude prices over the past two years mostly on “insufficient investment and rising energy demand,” especially from the booming economies of Asia.
“The rise has been a wake-up call for the industry and for producers and consumers alike, who are now beginning to address deliverability problem head on,” he said at an international energy conference in New Delhi.