Crude Pulls Back on Demand Estimate

OPEC lowers its prediction for 2005 worldwide consumption.
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Updated from 1:09 p.m. EDT

Crude futures fell Thursday as predictions for global energy demand continued to come down.

Crude for October delivery, which jumped nearly $2 Wednesday, closed down 34 cents to $64.75 a barrel on Nymex. Gasoline futures fell 4 cents to $1.89 a gallon.

In its monthly report for September, OPEC lowered its estimate for worldwide oil demand in 2005 by 150,000 barrels to 83.49 million barrels, citing downward revisions to earlier estimates and the impact of higher energy prices.

The cartel is scheduled to meet next week to discuss a 500,000-barrel increase in its formal production quotas. Qatar Energy Minister Abdullah al-Attiyah expressed skepticism that the increase will do anything to cool prices,

Reuters

reported.

"The sharp demand for products is the reason behind the rise and not demand for crude oil," al-Attiyah said.

The International Energy Agency said on Thursday it would not release more oil from its strategic reserves, saying that any additional supplies were unnecessary.

Natural gas, which has been trading in a record-high range of $10 to $12 per thousand cubic feet since Katrina hit, closed up 25 cents to $11.42 per thousand cubic feet.

The Energy Department reported Thursday that gas in underground storage rose more than expected, by 89 billion cubic feet. Analysts on average were expecting a build of 65 billion cubic feet.

Hurricane Katrina curtailed nearly 3.2 billion cubic feet a day of natural gas, destroying numerous platforms and pipelines.

"Natural gas is the big deal," said Bill O'Grady, assistant director of market analysis at A.G. Edwards. "We've been injecting gas into storage at a slower than average pace throughout the summer, and what helped this was a particularly hot summer."

"As long as you are injecting less than average, that is bullish for the market. People fear of a shortage in case this winter turns out to be colder than average," O'Grady said

On Wednesday, crude oil prices surged after the Energy Department reported stocks fell by a greater-than-expected 6.6 million barrels. Distillates, which include diesel and heating oil fell by 1.1 million barrels though analysts were expecting a build in that category.

"Yesterday's jump in oil prices was more of a short-covering than anything else," according to O'Grady. "We had a major support zone at $62.80 to o$63 a barrel in which everyone jumped in to cover their shorts."

In company news,

Apache

(APA) - Get Report

raised its quarterly dividend to 10 cents from 8 cents. The independent producer also said it has restored 81%, or 459 million cubic feet per day, of its natural gas production and 65%, or 45,600 barrels per day, of its oil production in Gulf Coast that was shut-in due to Hurricane Katrina. Its shares rose 89 cents, or 1.3%, to $71.89.

Shares of

Western Gas Resources

(WGR)

rose 2% to $51.12, after it said it will increase its quarterly dividend by 50% to 7.5 cents.

Valero Energy

(VLO) - Get Report

, the largest refiner in North America, said Thursday it plans to launch a two-for-one stock split as well as boost its quarterly dividend by 20% to 6 cents a share. Valero's shares were down $2.73, or 2.5% to $108.27 in afternoon trading.

Among most major oil producers shares fell after a brief rally earlier in the session

Exxon Mobil

(XOM) - Get Report

fell 0.3%,

ConocoPhillips

(COP) - Get Report

dropped 0.2%.

Chevron

(CVX) - Get Report

dipped 0.6%, and

BP

(BP) - Get Report

increased 0.8%.