Updated from 3:47 p.m. EST
Crude prices marched to another three-month low Friday, weighed down by unseasonably warm weather and the depressed demand wrought by this autumn's record high prices.
December crude closed down 27 cents to $57.53 a barrel, a 5% loss for the week. Unleaded gasoline fell about 2 cents to $1.48 a gallon, while heating oil continued its retreat, falling 2 cents to $1.72 a gallon.
Natural gas futures rose 33 cents to $11.71 per million British thermal units, a nearly 3% gain, in anticipation of colder weather next week.
Energy indices and stocks made slight gains, with the Amex Oil Index rising 1.12% and the Philadelphia Stock Exchange Oil Service Index closing up 0.49%. Energy companies notched modest gains today, with
rising 0.12% to $56.52,
increasing 0.69% to $56.62,
inching up 0.65% to $64.72,
climbing 0.17% to $63.50, and
gained 0.91% to $96.31.
"You're looking at a short-term reaction to the weather and funds liquidating their positions at year-end," said Bruno Stanziale, director in the commodities trading group at Societe Generale in New York. "We haven't gotten a real view of how the winter will shape up. I don't think fundamentally a lot has changed."
AccuWeather, a State College, Pa.-based weather forecaster, said warm air will blanket most of the country this weekend before cold weather finally arrives next week. By the middle of next week, the Great Lakes and New England should see freezing temperatures and possibly snow, AccuWeather predicted.
"Traders rediscover there's a winter every year," said James Williams, energy economist at WTRG Economics in London, Arkansas. "When traders are walking in from the subway after a week in the winter, they get back to market fundamentals."
Some analysts and traders believe high oil prices are not sustainable because inventories are building. In a Nov. 10 report, Citibank said prices may reach $50.16 a barrel.
"Whether it's this week or next, I think we'll see $50 or even lower," said Kyle Cooper, vice president in futures and fixed income for Citigroup Global Markets in Houston.
Investors and hedge funds have been pouring into energy to diversify and increase their returns, thereby driving up the price of oil. But as prices fall, they're likely to sell.
"By far, it's the buy side driving this," said Cooper. "There's too few financial sellers; that's the only shortage in the energy complex"
Crude oil supplies have been rising steadily for the past five weeks and the Energy Department and International Energy Department expect high prices will quell demand. Warmer weather has allowed many companies to stock up on winter gas in the past four weeks even though many oil and gas rigs are still not in operation. On Wednesday, the Energy Department said crude oil inventories rose by 4.5 million barrels to 323.6 million last week. Gasoline stores added 4.2 million barrels, and distillate stocks fell unexpectedly by 100,000 barrels, according to the agency's weekly petroleum report.
The International Energy Department, which coordinates energy policy for many European governments, slashed its estimate Thursday for world oil demand to 85.1 million barrels a day in the fourth quarter, down 400,000 barrels a day. The agency attributed the drop to "unusually warm weather and hurricane-related disruptions" that cut demand in September and October.
The agency also cut its estimate for 2006 world oil demand to 85.01 million barrels a day, down 140,000 barrels.
Although oil production is down about 50% in the Gulf of Mexico because of damage sustained in hurricanes Rita and Katrina, rising imports have made up for them. The U.S. trade deficit surged to a high of $66.1 billion in September, boosted by a tide of oil imports, the Commerce Department said yesterday.
In other news, Baker Hughes said active oil and natural gas drilling rigs in the U.S. dropped by 17 to 1,479 this week. Last year, there were 1,259 American rigs in operation.
, a Snyder, Texas-based company that provides onshore drilling services, said a former company officer may have embezzled approximately $70 million over the past five years. The company has started an investigation. The company's shares have recently fallen $2.94 per share to $29.89.