Crude futures fell in the United States Tuesday as concerns about reduced output in the North Sea were offset by expectations that an upcoming government report would show rising inventories of heating oil.
Light, sweet crude for January delivery was down 66 cents to $49.10 a barrel in afternoon trade on the New York Mercantile Exchange (search), reversing course from an intraday high of $50.40.
Traders said the initial runup was in response to the North Sea output problems and that the selloff began after prices neared the important technical threshold at $50.45 per barrel — which is the midway point between the intraday high set in late October and the low that was reached this month after the market had corrected by nearly 20 percent.
Another factor was a report from a private research group showing that consumer confidence in the United States declined for the fourth straight month in November, signaling doubts about the economy's strength.
"Right now the fundamentals and the technicals are lined up more than in the past," said Chuck Hackett, a broker and analyst at Access Futures & Options Trading, a commodity futures brokerage in Woodlake, Calif.
On Wednesday, the Energy Department (search) releases its weekly petroleum supply report and brokers expect to see rising supplies of crude oil and heating oil.
"There's not going to be any shortage of heating oil," said Ed Silliere, vice president of risk management at Energy Merchant in New York.
The nation's heating oil supply is 16 percent below year ago levels, though, and that has resulted in higher prices. Heating oil futures were down by 3.97 cents on Wednesday afternoon at $1.404 per gallon on Nymex.
In London, Brent crude futures rose 68 cents to $46.43 per barrel on the International Petroleum Exchange in response to the 6 percent decline in Norway's daily oil production.
A Statoil ASA (search) production rig shut down after a gas leak may be out of operation for a week or more, the company said Tuesday.
The closure means the loss of 130,000 barrels of oil a day, along with 75,000 barrels a day from the nearby Vigdis field. The petroleum ministry said the country's export supply wouldn't be affected, however, since it has sufficient reserves.
Analysts said an increase in crude and heating oil supplies in Wednesday's Energy Department report would likely ease prices further, while an unexpected drop could prompt a spike back above $50 a barrel.
"If distillate stocks show an increase, it would provide some form of psychological comfort for the market," Victor Shum, an analyst at Purvin & Gertz in Singapore said, referring to distillate fuel, which includes heating oil, diesel and jet fuel.
"The weather has not been that severe, which hopefully gives U.S. refineries some time to build up stocks," he added.
Crude prices have been pushed up more than 50 percent this year due to strong demand and concerns about the world's tight supply cushion, inflating fears about possible output disruptions in Iraq and Russia.
Crude futures would have to surpass $90 to match the inflation-adjusted peak price of 1980.