Updated from 12:34 p.m. EST
Crude continued to slide Tuesday, pulled down after
Chairman Alan Greenspan again argued that price pressures eventually will be moderated by waning global demand.
The May futures closed at $56.04 a barrel in Nymex floor trading, down 97 cents from Monday's settlement. Oil went as high as $58.28 Monday, eclipsing last week's peak. Gasoline prices fell more than 3 cents to $1.69 a gallon Tuesday.
In a speech to a refiners' group in Texas, Greenspan noted forward energy prices have started rising faster than spot prices, a phenomenon that could promote a building of inventories and the replenishment of an energy "buffer."
Still, Greenspan noted that the supply-and-demand picture, as presently constituted, is out of whack.
"Markets for oil and natural gas have been subject to a degree of strain over the past year not experienced for a generation," he said. "Increased demand and lagging additions to productive capacity have combined to absorb a significant amount of the slack in energy markets that was essential in containing energy prices between 1985 and 2000."
Another snapshot of demand comes Wednesday when the Energy Department releases its weekly report on crude inventories. Analysts are expecting a 2.3 million-barrel increase in U.S. oil stocks, after last week's greater-that-expected build of 5.4 million barrels.
Crude inventories have now risen for five straight weeks and stand roughly 10% above their year-ago levels. Likewise, despite some recent drawdowns, gasoline inventories remain about 6% above year-ago levels.
Oil prices have staged an unexpected rally in 2005 after a steep price correction in the final two months of 2004. A year ago at this time, the benchmark U.S. crude was trading around $34 a barrel.
Affecting trading Tuesday was an International Monetary Fund report that said the major reason for recent oil price increases "is the lack of spare capacity, particularly for light sweet crude oil, and related refining capabilities, following 20-25 years of underinvestment."
On the other side of the pendulum are bearish views from analysts such as Merrill Lynch's chief equity strategist David Bower, who said yesterday that we "might see $30 to $35 a barrel before we see $100 a barrel."
Just a week ago, analysts at Goldman Sachs argued that $105-a-barrel oil was possible in some scenarios.
In other industry news,
was raised Tuesday to neutral from underperform by analyst Jason Gammel at Prudential, following its long-awaited acquisition by
for $16.8 billion. Gammel also raised the target price to $62 from $47. Shares of Unocal were down 58 cents, or 0.97%, to $59.02.
said its full-year production will be 3% higher than 2004. Shares dropped 97 cents, or 0.88%, to $109.60.
Shares of most major oil producers were mixed.
fell 15 cents, or 0.25%, to $60.50; ChevronTexaco dropped 19 cents, or 0.33%, to $56.79;
gained $1.81, or 1.36%, to $60.57; and
rose 35 cents, or 0.56% to $63.17.