Oil Prices Fall Below $90 A Barrel
Friday, November 30th 2007, 7:19 am
By: News On 6
(AP) - Oil prices fell below $90 for the first time this month on expectations that OPEC will increase output next week and fading concerns that a pipeline fire in the U.S. will disrupt supplies. Light, sweet crude for January delivery fell $1.55 to $89.46 a barrel in electronic trading on the New York Mercantile Exchange by midday Friday in Europe.
On Thursday, the crude contract gained 39 cents to settle at $91.01 a barrel in choppy trade. In London, January Brent crude dropped $1.78 to $88.44 a barrel on the ICE Futures exchange.
Oil prices have tumbled this week amid speculation that supplies are rising and a slowdown in U.S. growth will undercut energy demand.
The fire along the oil conduit from Canada to the Midwest caused a spike above $95 a barrel Thursday _ and renewed speculation that oil was as back on its way to $100. But by the end of New York floor trading it was clear most of the network was quickly returned to service and that the fire-damaged section was expected to be back up in days.
An offer by the U.S. government to release oil from the Strategic Petroleum Reserve, if needed, also helped calm markets.
Traders are likely to return their focus to an OPEC meeting on Wednesday in Abu Dhabi, where the 12-member cartel is expected to decide whether to increase production. Several ministers of the Organization of Petroleum Exporting Countries have said in recent days that the group is ready to boost output to bring prices down.
``(OPEC) previously agreed to increase output by 500,000 barrels per day from Nov. 1,'' Vienna's PVM Oil Associates said in a research note. ``According to a tanker-tracker agency, OPEC exports are expected to rise by around 480,000 barrels per day in the four weeks leading up to Dec. 15, which is in line with the group's decision.''
Investors were also digesting Thursday's news that the White House cut its forecast for U.S. economic growth for next year and that housing prices dropped in the third quarter for the first time in 13 years.
Other analysts have pointed out, though, that the increasing expectation that the U.S. Federal Reserve will cut its key interest rate for a third time this year next month will likely depress the U.S. dollar, which could provide some support to oil. Crude futures offer a hedge against a weak dollar, because their price tends to rise when the U.S. currency is falling.
The fire late Wednesday along the Enbridge Energy Partners LP Lakehead pipeline in northern Minnesota, which carries crude oil from Saskatchewan province in Canada to the Chicago area, killed two repair workers.
The network consists of four separate conduits, and after the fire, all were shut down. But three of the lines carrying a total of about 1.4 million barrels of crude a day were restarted by the end of Thursday, according to the company. And the fire-damaged pipe, which can carry 420,000 barrels of crude a day, could be repaired and returned to service within two or three days, the company said.
The four pipelines together normally carry about 16 percent of U.S. crude imports and 8.3 percent of total domestic oil consumption.
Nymex heating oil futures fell 3.5 cents to $2.5421 a gallon (3.8 liters) while gasoline prices were down 3 cents to $2.2348 a gallon. Natural gas futures rose 6.8 cents to $7.52 per 1,000 cubic feet.