World oil prices plummet
(Agencies)
Updated: 2004-10-28 09:51

World crude oil prices plummeted after a wild ride as investors scrambled to bank profits following news of a weekly surge in US crude oil inventories.

Prices swung violently after the release of a weekly snapshot of US petroleum inventories.

Investors at first fretted when an Energy Department survey showed US commercial stocks of heating oil had dropped for the sixth straight week, sending prices soaring.

A motorist pumps petrol into a vehicle. World crude oil prices plummeted after a wild ride as investors scrambled to bank profits following news of a weekly surge in US crude oil inventories. [AFP/File]

But the mood switched as news sunk in that crude oil inventories had climbed sharply, sending prices into a downward spiral.

New York's benchmark contract, light sweet crude for delivery in December, plunged 2.71 dollars, or 4.9 percent, to close at 52.46 dollars a barrel, a three-week low.

It had peaked at 55.65 dollars -- two cents shy of an all-time record -- and plumbed a low of 52.10 dollars.

Brent North Sea crude for December slumped 2.11 dollars, or 1.4 percent, to close at 49.45 dollars. It had set a record high of 51.95 dollars before skidding as low as 49.25.

"At these highs, the volatility is amplified," PFC Energy analyst Jamal Qureshi said.

Investors saw no motive to set new highs, Qureshi said.

"So the rise of crude inventories gave an opportunity to take profits," he added.

Oil supply concerns were also assuaged by a "significant improvement" in output from the Gulf of Mexico, where hurricanes triggered underwater landslides, burying many oil platforms' pipeline networks.

Crude oil inventories surged 4.0 million barrels to 283.4 million barrels in the week to October 22, still near the lower end of average for the season, the Energy Department said.

Gasoline stocks rose 1.3 million barrels to 202.1 million, about average, the government survey showed.

But distillates -- mostly heating oil and diesel -- fell for the sixth consecutive week, declining by 2.4 million barrels to 116.6, below the average range.

Some analysts were surprised by the market's reaction to the inventory figures, which they said still pointed to a tight market.

"Heating oil stocks are now 15 percent below the average when you look at the last three years, and 13 percent down year-on-year," Commerzbank analyst David Thomas said in London.

"Forecasts are suggesting that we are in for a pretty cold winter this year in the northern hemisphere, compared to the last two winters.

"The situation is still tight. You still have the disruption fears: Nigeria's threat of strike, another bomb in Iraq and concerns about Russia's exports. All these things are going to keep oil prices high," he warned.

In Nigeria, a coalition of trade unions and pro-democracy groups issued Nigeria's President Olusegun Obasanjo with an ultimatum Tuesday, warning him to cut fuel prices this week or face a renewed nationwide general strike.

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