Oil drops as US demand falls
Oil fell for a third day in New York as Enbridge Energy Partners LP prepared to start a damaged pipeline, adding to concerns that US markets are oversupplied.
Crude dropped as much as 1.4pc after Enbridge said it will start preparations to flow oil through a pipeline linking Canada and refineries in the US Midwest early tomorrow.
The Energy Department report yesterday that petroleum demand tumbled 2.6pc to 9 million barrels a day, the lowest rate since the week ended March 12.
Oil’s losses were capped by forecasts that Tropical Storm Karl will strengthen in the Gulf of Mexico.
“From a fundamental point of view there isn’t much reason to go higher from here; there’s enough oil around,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich.
“In the past couple of weeks we’ve had tropical storms forming that didn’t disturb production, but the headline is always bullish.”
Crude for October delivery fell as much as $1.07 to $74.95 a barrel on the New York Mercantile Exchange. It was at $75.42 at 12:12pm.
Brent crude for November settlement on the London-based ICE Futures Europe exchange was down 4 cents at $79.38 a barrel.
Prices also declined before a US Labour Department report today that may show applications for unemployment benefits rose for the first time in a month last week, according to economists in a Bloomberg survey, signaling continuing weak demand for fuel.
“We’re not seeing as much consumption as we thought,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “There is an oversupply of oil.”
Karl gains strength
Tropical Storm Karl strengthened as it moved over the Gulf of Mexico and may become a hurricane by late tomorrow, the US National Hurricane Center said in an advisory issued shortly before 4am local time.
Karl’s winds strengthened to 50 miles (80 kilometers) per hour, the Miami-based center said. The storm was located 70 miles west of Campeche, Mexico, and 385 miles east of Tuxpan, Mexico, the center said.
Calgary-based Enbridge’s US unit will start its Line 6A once the Pipeline and Hazardous Materials Safety Administration is satisfied with the company’s repair and safety plans, administration spokesman Damon Hill said in an email.
Oil topped $78 a barrel this week, a one-month high, after the Enbridge pipeline was shut September 9 because of the leak at Romeoville, Illinois.
It can carry 670,000 barrels a day of crude, more than one-third of US Midwest imports.
US fuel demand slipped 1pc to 19.5 million barrels a day last week, the Energy Department said.
Crude stockpiles dropped 2.49 million barrels to 357.4 million, the report showed.
That matched the median 2.5 million-barrel reduction estimated by analysts in a Bloomberg News survey. Supplies were 13pc higher than the five-year average level.
Petroleum inventories decreased by 694,000 barrels to 224.5 million last week as imports fell to a five-month low and refinery output declined, the department said.
Stockpiles of distillate fuel, including heating oil and diesel, were down 340,000 barrels at 174.5 million.