Oil prices fell yesterday to an eight-week low under $47 a barrel, as growing fuel stocks in the United States eased fears of a winter supply crunch.
US light crude fell 59 cents to a low of $46.73 a barrel, the lowest price since September 22 and about 17 per cent below a record high of $55.67 on October 25. London Brent fell $1.51 to $40.80 a barrel.
A rebound in crude stocks in the United States, the world's largest energy market, has brought oil prices down from their peaks. Supplies have risen 22 million barrels in the past seven weeks, thanks in part to the highest Opec production in decades.
"At this moment, there are enough stocks, there is no real alarm. If you compare to last year, stocks in the world are pretty normal," said Jeroen van der Veer, president and chief executive of Royal Dutch/Shell Group.
Swelling stockpiles and signs that high energy costs are dulling economic growth, chipping away at fuel demand, have triggered an exodus of speculative funds from the oil markets.
Data last week from the US Commodity Futures Trading Commission showed that non-commercial crude oil speculators on the New York Mercantile Exchange had cut their net long positions to the lowest levels in a year.
"During the major run-ups, you had funds buying up the market when it was getting lower, and that was a sort of safety net for bullish players," said John Brady at ABN AMRO in New York.
"But we don't see that any more, and it looks like they (funds) don't seem to be interested in building long positions."
Heating oil inventories in the key markets of the United States, Germany and Japan are much lower than normal for the time of year, spurring fears of a supply squeeze should winter hit early or hard.
Temperatures in the key heating oil consuming region of the US northeast were below normal, but were expected to warm this week. US heating oil inventories are 17 per cent below 2003 levels, government data showed last week. Given that the key factors driving bearish sentiment - high crude imports and a lack of sharply colder weather to cause a jump in US heating oil demand - show no immediate signs of changing, prices will continue their downward trend," consultants PFC Energy told clients.
"However, unless this winter proves abnormally warm in the northern hemisphere, a major bullish turnaround looms once real winter weather arrives," PFC Energy added.
Prices continue to find support from supply uncertainties in some Opec producers, with Nigerian unions planning a strike from today and another sabotage attack on Iraq's infrastructure. The Nigerian government yesterday agreed to reduce gasoline pump prices by 10 per cent, in an effort to resolve the dispute.
The unions have threatened to block about two million barrels of daily production in the world's eighth biggest oil exporter, although past strikes have left output and exports unaffected.