Oil prices continued to slide Wednesday as lingering concerns about Ireland’s debt problems and China’s efforts to slow its economy overshadowed a bullish report on U.S. oil inventories.
Benchmark oil for December delivery fell $1.61 to $80.74 a barrel on the New York Mercantile Exchange, its lower level in almost a month. The price has fallen about $6 in the past week as the global economic issues took center stage.
Investors have been selling because they’re more concerned about a slowdown in demand in Asia and Europe. A new U.S government report showing inventories of oil, gasoline and distillates all fell last week couldn’t overcome that negative sentiment, analysts said.
The Energy Department said commercial crude oil inventories fell by 7.3 million barrels to 357.6 million barrels for the week ending Nov. 12. Gasoline inventories declined by 2.7 million barrels to 207.7 million barrels while inventories of distillate fuel, which include diesel and heating oil, fell by 1.1 million barrels to 158.8 million barrel. All three products remain at levels higher than the average range for this time of year.
The drop for both oil and gasoline was larger than expected by analysts, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. For distillate fuel, analysts had predicted a drop of 1.8 million barrels.
Just a week ago, a report of a surprise decline in oil supplies was enough to push oil to a two-year high near $88. But since then, China’s government has announced food subsidies for poor families to try to stall a double-digit surge in prices and ordered banks to increase reserves to curb loan growth.
The Chinese government is trying to slow down robust economic growth and head off a bout of inflation.
And European leaders are working to help Ireland, which is struggling after a collapse in the housing market forced the country to take over three large banks. A financial bailout of Greece earlier this year put pressure on commodities and raised concerns about diminished demand.
Oil prices likely will remain under pressure until there is more clarity on the situations in China and Ireland, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.
He and Mike Zarembski, a senior commodity analyst at OptionsXpress Inc., both believe the slide is more of a correction than a long-term trend. They say there is still ample demand for energy products in China and other parts of the world.
In other Nymex trading in December contracts, heating oil fell 4.6 cents to $2.2630 a gallon and gasoline slipped 1.5 cent to $2.1407 a gallon. But and natural gas rose 12.1 cents, or 3 percent, to $3.939 per 1,000 cubic feet.
AP