Oil Is Little Changed After Falling on Plunge in U.S. Demand

By Christian Schmollinger

Sept. 25 (Bloomberg) -- Crude oil was little changed after dropping 3.3 percent in the last two days following a government report yesterday that showed U.S. fuel demand declined to the lowest in almost five years.

Consumption averaged 19.5 million barrels a day during the past four weeks, down 6.6 percent from a year earlier, and the lowest since October 2003, the Energy Department said in a weekly report. Sales of previously owned U.S. homes fell more than forecast in August, the National Association of Realtors said yesterday, a sign of the weakness in the economy.

``Oil has been on the slide and it's all driven by the slowdown in the U.S. demand,'' said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne. ``Demand is off because the U.S. is heading to a recession. All the indicators are suggesting the consumer is finding it tough out there.''

Crude oil for November delivery was at $105.70 a barrel, down 3 cents, in after-hours electronic trading on the New York Mercantile Exchange at 9:28 a.m. Singapore time. It earlier fell as much as 0.6 percent to $105.13 a barrel. Yesterday, futures dropped 88 cents to settle at $105.73 a barrel on Nymex.

Production platforms, refineries and ports along the Gulf of Mexico were shut last week in the aftermath of hurricanes Gustav and Ike, which struck earlier this month.

Ike made landfall near Houston, the largest U.S. petroleum port, on Sept. 13. The Houston Ship Channel partly reopened to daylight transit by oceangoing tankers on Sept. 17. The Louisiana Offshore Oil Port, the biggest U.S. oil-import terminal, resumed tanker unloading on Sept. 15 after being shut Sept. 10.

Production Idled

U.S. energy producers still have about 62 percent of oil production idled in the Gulf, the U.S. Minerals Management Service said in a statement on its Web site. The area accounts for about 26 percent of U.S. oil output.

About 52 of 3,800 oil and gas production platforms were destroyed by Ike, while 29 platforms suffered extensive damage, MMS said. This means it could take up to six months for them to return to service. Another 33 others received moderate damage, meaning they could be producing in a month, MMS said.

U.S. oil and gasoline supplies dropped as refineries cut operating rates to the lowest in at least 19 years.

Supplies of crude oil fell 1.52 million barrels to 290.2 million in the week ended Sept. 19, the department said. Crude- oil imports tumbled 16 percent to 7.14 million barrels a day, the lowest since January 2000.

Gasoline stockpiles dropped 5.9 million barrels to 178.7 million barrels, the lowest since 1967. Inventory levels prior to 1990 were reported on a monthly basis. Supplies of distillate fuel, a category that includes heating oil and diesel, fell 4.18 million barrels to 125.4 million barrels.

Refinery Utilization

Refineries operated at 66.7 percent of capacity last week, the lowest since the department began compiling weekly figures in 1989. The previous low was 69.8 percent of capacity, touched in September 2005, when refineries along the Gulf Coast were shut after hurricanes Katrina and Rita battered the region.

Brent crude oil for November settlement was at $102.67 a barrel, up 22 cents, on London's ICE Futures Europe exchange at 9:01 a.m. Singapore time. It declined yesterday 63 cents, or 0.6 percent, to settle at $102.45 a barrel yesterday.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.