Oil retreats to below $105 after recent spike
- Article by: The Associated Press
- July 11, 2013 - 3:25 PM
The price of oil retreated below $105 a barrel Thursday, ending a surge that had pushed crude to a 16-month high.
The pullback followed a report from the International Energy Agency that said supplies would exceed an expected rise in demand next year.
U.S. benchmark crude fell $1.61 to close at $104.91. Brent crude, which is used to price imported crude used by many U.S. refineries, fell 78 cents to $107.73.
Oil has shot higher in recent days on a dramatic drop in supplies of oil and gasoline in the U.S. The decline suggests that demand may be rising. Crude rose as high as $107.45 early Thursday — the highest since March of last year — before falling back in later trading.
Analysts noted that even as prices were rising, global supplies remained ample and world demand, while growing, was moderate.
"The (U.S. crude) market has become overcooked," analyst Jim Ritterbusch, of Ritterbusch & Associates, wrote in a report Thursday.
Oil extended its recent rise Wednesday after the Energy Department said U.S. crude supplies fell by 9.9 million barrels in the week ended July 5. Gasoline supplies fell by 2.6 million barrels. In the past two weeks, oil supplies have dropped 20.2 million barrels, which is slightly more than one day's consumption for the U.S. Gasoline supplies have fallen 4.3 million barrels.
The supply drop, along with continued concerns that political upheaval in the Middle East could disrupt deliveries, had sent the price of oil up by $11 per barrel in two weeks.
The supply drop is also pushing U.S. retail gasoline prices higher, ending what had been a long, gradual decline in pump prices. The national average price of a gallon of gasoline rose 2 cents Thursday to $3.52 per gallon. It marked the third straight day of increases, though the average is 11 cents lower than it was a month ago.
More price increases at the pump are expected in the coming days as higher crude prices and wholesale gasoline prices translate to higher retail prices.
But Thursday's crude pullback may limit the jump in gasoline prices. Despite the supply drop in the U.S., oil and gasoline inventories remain above their five year averages.
"There is little evidence that the stronger U.S. economy is leading to a recovery in U.S. oil demand," said commodities analyst Caroline Bain of the Economist Intelligence Unit. If the geopolitical risk from Egypt and the Middle East were to fade, "there will be few pillars of support for the oil market in the second half of this year," she said.
On a similar note, the Paris-based IEA said expectations that forecasts for 2014 should give those betting on rising oil prices "some cause for alarm."
The IEA expects supply growth to result in an additional 1.3 million barrels of oil a day in 2014, while global demand is seen growing by just 1.2 million barrels a day next year.
"Non-OPEC supply growth looks on track to hit a 20-year record next year," the IEA said Thursday in its latest monthly oil market report. "While demand growth is also forecast to pick up momentum ... this will still fall short of forecast non-OPEC supply growth."
The IEA pointed to growing oil production in the United States and Canada as the key source of the extra supplies.
"North American supplies are set to grow strongly, outpacing declines elsewhere," the IEA said.
In other energy futures trading on Nymex:
— Wholesale gasoline rose 1 cent to settle at $3.02 a gallon.
— Natural gas fell 7 cents to settle at $3.61 per 1,000 cubic feet.
— Heating oil remained unchanged, settling at $3.00 a gallon.
Associated Press writer Pablo Gorondi contributed to this report from Budapest.
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