Updated from 11:30 a.m. EST
Crude oil futures fell back below $59 Tuesday as traders focused on high fuel inventories and a government report that said OPEC will not trim production as much as had been expected.
The Organization of Petroleum Exporting Countries will trim daily output by 745,000 barrels this month, and not by its promised 1.2 million barrels, according to the U.S. Energy Department's short-term outlook released Tuesday. Iran, Nigeria, Libya, Indonesia, Venezuela and Saudi Arabia will not cut production by as much as they had agreed to.
Light sweet crude slipped $1.09 to $58.93 a barrel on Nymex. On Monday, OPEC officials said they may cut output in December. That, and an attack on an
flow station in southern Nigeria, put prices above $60.
Slumping crude prices dragged down heating oil and wholesale gasoline futures Tuesday. Heating oil finished off 3 cents at $1.68 a gallon, and unleaded gasoline ended down 1 cent at $1.52 a gallon.
Only natural gas rebounded and added 26 cents to settle at $7.75 per million British thermal units after weather forecasts changed and now call for cold weather in the Northeast next week.
Oil prices have been locked in a tight band of $57 to $61 depending on whether the market was focused on supply levels, weather patterns, OPEC or the possibility of sanctions against Iran over its nuclear program.
The Nigerian and Saudi Arabian oil ministers both said this week that the energy markets are oversupplied and may necessitate a production cut to bring up prices. OPEC, which controls more than a third of the world's crude, agreed to decrease output by 1.2 million barrels of oil starting this month.
However, it's unclear whether all of OPEC's 11 members have cut, since they stand to lose millions of dollars in oil revenue. Only five countries have publicly agreed to the cut.
OPEC next meets Dec. 14 in Nigeria and will debate whether to reduce output further, "but it looks as if some further mopping up will be necessary," OPEC President and Nigerian oil minister Edmund Daukoru told the
Although the cartel cut output when prices fell below $60 last month, Daukoru said it doesn't have a "rigid floor" or price it wants to defend.
As OPEC mulls taking out more production, domestic fuel supplies -- crude and refined products -- are between 2% and 13% higher than they were a year ago, thanks to mild temperatures and little hurricane activity in the Gulf of Mexico.
Traders are expecting another increase in crude stockpiles in the U.S. Energy Department's weekly supply report due out on Wednesday. Refiners are slowly reopening shuttered gasoline and distillate production units after undergoing seasonal maintenance. During the fall and spring, refiners typically tweak their production units ahead of peak demand in the summer and winter.
Inventories of crude likely rose by 775,000 barrels last week, according to a
poll of analysts. Gasoline stockpiles probably fell by 50,000 barrels and distillates dropped by 800,000 barrels.
Refining activity probably increased to 89.28% last week, up 0.38 percentage points from the previous week.
In stock market action, shares of drilling and refining companies were shedding 1.1% on the Amex Oil Index.
were leading decliners by as much as 2.5%.
( FTO) were losing 2.3% to $30.55 after the refiner missed analysts' profits expectations. The company made $120.9 million, or $1.08 a share, in the third quarter, vs. $109.2 million, or 95 cents a share, in the same period last year. Analysts polled by Thomson First Call had expected earnings of $1.09 a share.
Revenue came in at $1.38 billion, up from $1.18 billion last year, thanks to hefty profit margins for gasoline and crude. Frontier processes heavy crude, which contains a lot of sulfur, into petroleum products.