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Oil Prices Flat Ahead of Supply | ASHARQ AL-AWSAT English Archive 2005 -2017
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VIENNA, Austria, AP – Oil futures were flat Wednesday after falling more than a dollar per barrel a day earlier on concern that high prices were hurting demand.

But analysts expected prices to rise later in the day following the release of U.S. data reflecting recent declines in crude stockpiles and worries remaining about refinery capacity.

Light, sweet crude for November delivery inched up 2 cents to $63.92 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. The contract fell $1.57 to close at $63.90 on Tuesday.

Heating oil was down by half a penny to $2.0425 a gallon while gasoline inched down to $2.0110.

November Brent futures at London”s International Petroleum Exchange were down 3 cents at $61.19 a barrel.

Traders closely monitored natural-gas futures, which closed at a record high Tuesday for a front month after the U.S. Minerals Management Service said 72 percent of Gulf gas production remained shut in.

Natural gas rose 4.6 cents to $14.270 per million British thermal units Wednesday after gaining 20.7 cents Tuesday to close at $14.224.

Heavy damage by hurricanes Katrina and Rita to production facilities means it could take months to return offshore natural-gas production to normal levels. The Gulf Coast produces about one-fifth of the natural gas used by U.S. industry and to heat homes.

The loss of natural gas output is particularly troublesome, analysts say, because there is no emergency stockpile.

&#34The outlook for winter is grim and the threat to the U.S. economy is real from extremely high gas prices and shortages,&#34 Energyintel analyst Tom Wallin said in a research note. &#34Market talk is of gas at the (oil) equivalent of over $100 per barrel this winter.&#34

Concerns over a slowdown in U.S. energy demand have been lingering in the market since Hurricane Katrina drove crude oil prices to a record high of $70.85 a barrel on Aug. 30.

Recent U.S. government and industry data have shown that oil demand has dropped significantly in the past month, apparently as an increasing number of motorists have cut back on discretionary driving.

&#34The worry in the market is that the impact of hurricanes Katrina and Rita, together with the arrival of winter, may be a significant tipping point in U.S. economic activity,&#34 said Victor Shum, energy analyst with Purvin & Gertz in Singapore.

But some traders said energy prices were likely to continue to rise, as a significant demand slowdown would not be immediate.

&#34It took two years to get here, and a reversal won”t be engineered overnight, or in a week or a month,&#34 said Mike Fitzpatrick of the brokerage Fimat USA Inc.

Paul Hornsnell, head of energy research at Barclays Capital in London, said he sees crude &#34stuck between $60 and $70&#34 with many governments expected to step in and cap any higher prices.

&#34But they can”t do much about products prices,&#34 which will likely move upward because of continuing supply concerns, Hornsnell added. He estimated losses caused by hurricanes translated into a 200 million barrrel shortfall in refined products.

About 1.35 million barrels a day of oil production in the Gulf of Mexico, or 90 percent of total daily output there, was shut in on Tuesday, down from 93 percent on Monday, the U.S. Minerals Management Service said.

The U.S. weekly petroleum inventories data due out later Wednesday was expected to show drawdowns across the board. A Dow Jones Newswires poll showed commercial crude stocks are expected to fall by 390,000 barrels last week, when Hurricane Rita barreled through the U.S. Gulf Coast.

Hurricane Stan, which slammed into Mexico”s Gulf Coast on Tuesday, forced the closure of all three of the Mexican Gulf Coast crude-oil loading ports as a precaution, but the shutdowns weren”t expected to affect oil prices.