Crude oil prices fell more than 1% today ahead of tonight’s supply report from the US Department of Energy. Last week’s report showed that inventories rose by 1 million barrels and the crude market fell away 3% at the end of the week. However severe weather in the Gulf of Mexico, a weak dollar and growing Chinese import demand spurred oil futures back above $80 earlier this week.
As investors anticipate the weekly supply data, some appear to be getting the ‘jitters’, analyst reports suggest that sentiment is siding with the bears.
On the CME (Chicago Mercantile Exchange) Globex Crude oil futures dropped by $1.00 to trade just above $78/barrel.
The week’s first supply report preceded the sell-off in North America last night. The American Petroleum Institute (API) showed that crude inventories climbed 1.22 million barrels and gasoline supplies rose by 1.4 million barrels in the previous week.
This latest piece of supply data further highlights the gap between crude supply and demand. Similarly the Qatar oil minister was reported to have indicated that OPEC (Organisation of Petroleum Exporting Countries) is unlikely to alter output at its next meeting in December. In several reports Qatar oil minister Abdullah al-Attiyah said that current inventory levels were ‘very high’ and there was no shortage in the market at all.
Elsewhere other reports implied an improving demand scenario going forward. According to data released by Chinese customs authorities early this morning, China’s net oil imports were increasing and almost reached 4.5 million barrels per day (bpd) last month. The data reflects a 13% increase over September and it is the second-highest month on record.
Additionally the US Energy Information Administration (EIA) raised eyebrows yesterday evening as it commented on its projections for 2010. According to the EIA’s projections the gap between supply and demand is due to narrow compared with its previous guidance. EIA said that global oil production next year is forecast to rise to 85.49 million (bpd) while demand is also expected to be higher at 85.40 million bpd. Previous EIA guidance projected a surplus of 290,000 bpd.
On the London Stock Exchange, Oil and Gas Majors followed crude prices lower. BG Group (LSE: BG) and Tullow Oil (LSE: TLW) declined 1.4%, while Petrofac (LSE: PFC) shed 1%. Supermajors BP (LSE: BP) and Shell (LS:E RDSB) declined marginally, as did Cairn Energy (LSE: CNE).
Midcaps also tumbled as Dana Petroleum (LSE: DNX) and Dragon Oil (LSE: DGO) declined 3% and 2% respectively, while Heritage Oil (LSE: HOIL) lost 1.4%.
Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) was among the leading risers in the sector, tacking on 4.5%. Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) added 3.5%, while energy investor Xtract Energy PLC (AIM: XTR) and Kazakhstan operating Max Petroleum (LSE: MXP) rose 3%.
EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG) went in a different direction, sliding 5%. US focused junior Empyrean Energy (AIM: EME) followed with a 4.5% decline, while Western Europe operating oil and gas company Northern Petroleum (AIM: NOP) and Iraq operating Irish oil company Petrel Resources (AIM: PET) shed 4%.