Decline in oil prices just fleeting trend, experts say

Decline in oil prices just fleeting trend, experts say
Wednesday, October 20, 2004
BY BRAD FOSS
Associated Press

The two-day decline in oil prices, with crude futures briefly dipping below $53 a barrel yesterday, is a temporary trend that is likely to reverse itself before too long, analysts and traders said.

The pullback came in spite of an attack on an Iraqi oil pipeline and persistent concerns the world’s immediate oil-output capabilities have been pushed close to their limits due to unexpectedly strong demand.

While gasoline consumption typically tapers off at this time of year, demand for home-heating fuels begins to rise.

“It would be a rare event to have the market top out ahead of winter,” James Cordier, head trader at Liberty Trading Group of Tampa, Fla., said.

Instead Cordier expects a “winter premium” to be built into the cost of oil, with prices rising to the $56 to $57 range, at least until the beginning of December. At that point, analysts will have a better understanding of winter demand and whether there is enough natural gas and heating oil to meet it.

Light crude for November delivery settled down 38 cents, to $53.29 per barrel on the New York Mercantile Exchange, coming on top of the $1.26 per barrel slide in prices the day before. Futures prices had fallen as low as $52.59 in overnight electronic trading.

In London, December Brent crude futures on the International Petroleum Exchange fell 14 cents to settle at $48.77 per barrel.

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