Economic Calendar

Thursday, September 25, 2008

Crude Oil Falls as Concerns Grow Over U.S. Fuel-Demand Outlook

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By Grant Smith

Sept. 25 (Bloomberg) -- Crude oil declined for a third day, erasing earlier gains amid growing concerns over U.S. demand.

The U.S. could ``slip into a financial panic'' if Congress doesn't pass a $700 billion bailout program to help stabilize the financial system, President George W. Bush said last night. The country's crude inventories fell less than expected, the Energy Department said, and refinery rates dropped to the lowest in at least 19 years amid slowing consumption.

``The hurricane season is behind us but stormy economic conditions are not, and there are implications for weaker demand,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd.

Crude oil for November delivery fell as much as $2.38, or 2.3 percent, to $103.35 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It earlier rose 0.8 percent to $106.60 and traded at $104.35 at 11:32 a.m. London time.

The contract settled 88 cents lower at $105.73 yesterday, even after an Energy Department report showed gasoline stockpiles dropped to 178.7 million barrels, the lowest since 1967.

``The fact prices didn't rise further after the inventory report shows the uncertainty about the U.S. recovery package,'' said Carsten Fritsch, a Commerzbank AG analyst in Frankfurt. ``Price risks are still tilted to the upside because of growing supply risks.''

Supply Threats

Threats to supply of crude and products increased today as Royal Dutch Shell Plc shut a gasoline-making unit at Europe's largest oil refinery, while in Nigeria, Chevron Corp. faces renewed strike action.

Shell shut the unit at its Pernis refinery in the Netherlands following a technical fault last night, company spokesman Wim van de Wiel said.

In Nigeria, a strike planned by Members of the National Union of Petroleum and Natural Gas Workers may disrupt exports from Chevron's Escravos terminal. The company produced 353,000 barrels of crude daily in Nigeria in 2007, according to its Web site.

U.S. supplies of crude oil fell 1.52 million barrels to 290.2 million in the week ended Sept. 19, the Energy Department said yesterday, less than the 2.5 million-barrel drop forecast by analysts. Refineries operated at 66.7 percent of capacity last week, the lowest since the department began compiling weekly figures in 1989.

Brent crude oil for November settlement declined as much as $2.34, or 2.3 percent, to $100.11 a barrel on London's ICE Futures Europe exchange. It was at that price at 12:50 p.m. local time.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net




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