Oil Price Falls Ahead of U.S. Supply Data

Crude oil futures prices slipped Tuesday to finish below $50 a barrel and at its lowest close since mid-February on anticipation that a key U.S. petroleum report later this week would reveal further increases in crude, distillates and gasoline inventories.

Light, sweet crude for June delivery fell $1.42 to settle at $49.50 a barrel on the New York Mercantile Exchange (search). Unleaded gas fell 5.51 cents to $1.4594 a gallon, while heating oil fell 2.72 cents to $1.4360 a gallon.

In London, Brent crude fell 53 cents from Friday's close to $50.56 a barrel on the International Petroleum Exchange (search), which was closed on Monday.

Oil prices have been on an overall downward trend in the past week, with the most recent news being the U.S. Commerce Department's announcement that the U.S. economy grew at a slower-than-expected rate of 3.1 percent in the first quarter.

Other nations have also issued slower-than-expected growth estimates because of high oil prices.

Victor Shum, an oil analyst at Texas-based Purvin & Gertz in Singapore, said the market was "bearish" ahead of Wednesday's weekly U.S. Energy Department on that country's petroleum inventories — the main market mover in recent weeks.

"The overall global oil market has not seen any fresh news, but there are expectations that the U.S. Department of Energy data will show another increase," said Shum.

In Paris, Frederic Lasserre, head of commodities research at SG Securities, suggested markets will fluctuate around the $50 mark in the short term before heading lower to test $45.

"It's not only a short-term outlook that is weighing on the price," he said. "The latest (negative) economic data in the U.S. tend to have changed the market mood, which was overly bullish.

"Demand is showing some signs of a slowdown," he said. "Economic demand is slowing all over except in China, but once consumption slows in the U.S. this will have an impact as well on Chinese exports and GDP growth."

Last week, Washington said inventories of crude oil grew by 5.5 million barrels to 324.4 million barrels, or 9 percent above year-ago levels — the 10th time supplies have risen in the past 11 weeks.

Crude supplies in the United States, the world's largest energy consumer, have shown builds in recent weeks but concern remains over the country's supply of gasoline ahead of summer, and the driving season — although some forecasts suggested gasoline supplies could also rise.

In Vienna, an energy market report from PVM energy consultants forecast that the U.S. figures will likely show an increase in crude stocks of slightly above 1 million barrels and a "surge" of around 700,00 barrels for distillates.

"Most interesting are estimates for a build in gasoline stocks ahead of the summer driving season," due to imports from Europe, said the report.

While oil futures have fallen from their peak above US$58 a barrel, prices remain more than 30 percent higher than a year ago.

Shum said that the market remains "volatile" on tight global supplies and market jitters about unplanned output disruption. Production glitches, unrest in the Middle East, Nigeria, Russia and Venezuela all contributed to the 2004 spike.