Crude oil fell for a second day in New York on expectations rising production in the Gulf of Mexico and warmer-than-usual weather will help bolster U.S. fuel stockpiles before winter.
Home-heating use in the U.S. Northeast, where 80 percent of the nation's heating oil is consumed, will be about 23 percent below normal through Nov. 12, Minnesota-based Meteorlogix LLC said yesterday. Oil companies repairing hurricane damage in the Gulf restored about 16 percent of the region's output last week, a government report on Nov. 4 showed.
"The Gulf production is improving pretty quickly, finally, after being down and out for a couple of months," David Thurtell, a commodity strategist at Commonwealth Bank of Australia, said in Sydney. "The weather so far has been kind, which has helped, but it's still early days."
Crude oil for December delivery fell as much as 83 cents, or 1.4 percent, to $59.75 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $60.15 at 10:18 a.m. Singapore time, 21 percent higher than a year ago.
The December contract fell $1.20, or 1.9 percent, to $60.58 a barrel on Nov. 4, taking its decline last week to 1.1 percent. Oil futures have fallen 15 percent since reaching a record $70.85 on Aug. 30, the day after Hurricane Katrina made landfall after wrecking rigs and platforms in the Gulf of Mexico.
The decline in prices stalled last week as oil closed at a 14-week low of $59.75 on Nov. 2. The day before, bets on falling oil prices by hedge-fund managers and other large speculators reached their highest level since September 2003, according to Commodity Futures Trading Commission data.
Short-Positions
Speculative short positions, or bets prices will fall, outnumbered long positions by 42,040 contracts on Nov. 1, up 10 percent from a week earlier, the Washington-based commission said in its Commitments of Traders report on Nov. 4.
Prices are unlikely to fall further because cooler temperatures will boost demand for heating fuel, Commonwealth's Thurtell said.
"We'll be in the early $60s for the next couple of months, certainly until we get through this peak demand season," Thurtell said.
The Gulf of Mexico accounts for about 30 percent of U.S. domestic oil output. Production was virtually halted after Hurricane Rita struck the Texas coast on Sept. 24. Repair efforts were further delayed when Hurricane Wilma crossed the eastern part of the Gulf before striking Florida Oct. 24.
Oil companies increased daily production last week by almost 240,000 barrels, according to the U.S. Minerals Management Service. That left production 52 percent below normal, the service said on Nov. 4, from 68 percent a week earlier.
Oil Survey
"Supply is still very tight," Commonwealth's Thurtell said. "Gulf production is still coming back but it's just coming back from what was a disaster story, literally."
Oil prices were expected to decline this week, based on a weekly Bloomberg survey of 52 oil traders and analysts. Twenty- five, or 48 percent of respondents, said prices would fall this week. Fifteen, or 29 percent, said oil would be little changed and 12, or 23 percent, forecast a gain.
The survey followed a U.S. Energy Department report showing U.S. crude-oil supplies rose for a fourth straight week, gaining 2.7 million barrels to 319.1 million in the week ended Oct. 28, 10 percent higher than a year earlier.
Analysts who expected prices to rise said that the U.S. is one cold snap away from surging prices. Supplies of heating oil have declined 6.1 percent in the past four weeks, and were 1 percent below the five-year average for the period.
E-mail: gavinevans@bloomberg.net