On the Chin
Saturday, October 3rd, 2009
By Jason Draper
Oil has been trading within a $65 to $75 range for the past two months.
“The market can drop close to $3 and still not penetrate to an area where it means very much,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The battle we’re seeing between $65 and $75 is still being played out. The bulls, basing their trades on the ideas that the economy is improving, are kind of taking it on the chin.”
Brent crude oil for November settlement dropped $1.12, or 1.6 percent, to $68.07 a barrel on the London-based ICE Futures Europe exchange.
Higher output from non-OPEC producers also weighed on prices.
Russia increased oil output 1.7 percent to a post-Soviet high in September from a year earlier after OAO Rosneft brought a new field on line in August. Total production rose to 10.01 million barrels a day from 9.84 million barrels in September last year, the Energy Ministry’s CDU-TEK unit said in an e- mailed statement today.
Russian Output
The figure puts Russian output about 25 percent higher than that of Saudi Arabia, the world’s largest producer in 2008, according to U.S. Energy Department data and Bloomberg estimates.
The kingdom pumped 8.015 million barrels a day last month, according to a Bloomberg report published yesterday. It has cut output by 17 percent from 9.6 million barrels a day in July 2008 as part of an effort by the Organization of Petroleum Exporting Countries to curtail shipments to support prices.
Crude oil futures may decline next week as refineries slow operations and demand decreases before the North American heating season begins, a Bloomberg News survey showed.
Fifteen of 31 analysts, or 48 percent, said futures will drop through Oct. 9. Six respondents, or 19 percent, forecast that the market will rise and 10 said prices will be little changed. Last week, 55 percent of analysts said oil would fall.
Oil volume in electronic trading on the Nymex was 463,022 contracts as of 3:51 p.m. in New York. Volume totaled 578,887 contracts yesterday, 5.1 percent higher than the average over the past three months. Open interest was 1.2 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.
