Oil prices fell in light pre-holiday trading on Friday, but held above $62 a barrel as brokers weighed slower economic growth and expectations of a mild winter against the Organisation of the Petroleum Exporting Countries’ (Opec) determination to tighten up worldwide supplies.
Light sweet crude for February delivery declined 25 cents to $62,41 in a shortened session on the New York Mercantile Exchange. On Thursday the contract fell more than $1 a barrel.
Alaron broker Phil Flynn said mild autumn temperatures have led many energy traders to expect that winter, which officially began on Friday, will be warmer than normal. The United States National Oceanic and Atmospheric Administration said last month that the unusual warming of water in the Pacific Ocean known as El Niño was expected to continue into winter.
”The only thing I would caution is that the guys worried about El Niño are the same guys that predicted a record hurricane season this past summer,” Flynn said.
The National Weather Service forecast on Thursday that temperatures in the US Northeast — an area of high demand for heating fuel and natural gas — would remain above normal through the first days of January.
Vienna’s PVM Oil Associates noted that downward revisions in US economic growth to 2% in the third quarter ”added a bearish note to the market”. The ailing housing market was the main reason why economic growth slowed in the late summer, according to the Commerce Department.
UBS energy economist Jan Stuart said in a research note that the relatively high price of crude oil, even in the face of warm weather and slowing economic growth, signifies ”the market’s resilience and anticipation of looming tightness early next year”.
Opec said last week that it plans to reduce output by an additional 500 000 barrels a day beginning in February. That comes on top of a previously announced cut of 1,2-million barrels per day. However, some analysts said that by announcing a production cut that begins in the future, the cartel left itself the option of keeping output steady if prices are deemed high enough.
US crude inventories plunged by 6,3-million barrels last week from the previous week, the Department of Energy reported on Wednesday. That was much greater than analysts’ expectations of a drop of between 1,8-million barrels and two million barrels.
The big draw was in part because of fog-related shipping disruptions along the Gulf Coast that have since been cleared up. — Sapa-AP