US ice storm causes oil price decline in Asian trading

Source: Exec Digital USA

Date :12/12/2007 7:33:35 AM

Oil prices dropped yesterday in Asia on reports pipelines shut by an ice storm in the US Midwest had been restarted.

An ice storm that caused outages of key U.S. oil pipelines helped drive oil prices up by more than $2 a barrel in the previous session. But Dow Jones Newswires reported that at least one of the pipelines — some of which serve the closely watched New York Mercantile Exchange delivery terminal at Cushing, Okla. — had been quickly restarted and that three others soon would be.

"Yesterday's $2 increase was primarily driven by the rather severe ice storm that knocked out power around Cushing," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

"But that's just a short term weather thing, no real disruption there, so that's why the oil price is edging down some," he said.

Light, sweet crude for January delivery fell 65 cents to $89.37 a barrel in Asian electronic trading on the Nymex by midday in Singapore. The contract rose $2.16 to settle at $90.02 a barrel Tuesday.

While traders saw the Fed's decision to cut its federal funds rate by one-quarter percentage point to 4.25 percent as a move that will help the U.S. economy — the world's top oil consumer — and bolster demand for crude, many were hoping for a larger half-point cut.

The larger cut would have been more of a boost to U.S. economic growth and would have weakened the greenback further, both factors that support oil prices. After the Fed settled for the smaller move, oil prices fell from Tuesday's highs and kept falling in after-hours trade.

Market participants were also eyeing the release later Wednesday of a report by the U.S. Energy Department's Energy Information Administration expected to show domestic crude oil and petroleum product stockpiles rose last week.

The average forecast of analysts polled by Dow Jones Newswires was for crude supplies to grow by 100,000 barrels.

Gasoline inventories were estimated to increase 1.2 million barrels. Distillate stocks, which include diesel and heating oil, were tipped to rise 300,000 barrels, the survey showed.

In other Nymex trading, heating oil futures fell 0.63 cent to $2.5167 a gallon while gasoline prices dropped 0.74 cent to $2.2840 a gallon. Natural gas futures added 4.9 cents to $7.134 per 1,000 cubic feet.

In London, January Brent crude dropped 56 cents to $89.43 a barrel on the ICE Futures exchange.

December 12, 2007