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Oil price drops near US$86
NEW YORK—The price of oil fell to a three-month low as big corporations cut earnings forecasts, raising concerns about economic growth and oil demand. US benchmark oil dropped US$2.32, or 2.6 per cent, to US$86.29 a barrel in afternoon trading in New York. It’s lost about six per cent in the past three trading sessions. Brent crude fell US$1.64, or 1.5 per cent, to US$107.79 in London.
That’s starting to mean more relief at the gas pump for US drivers. The national average for a gallon of regular gasoline dropped two cents overnight to US$3.65 (96 cents a litre). The price has fallen 17 cents per gallon in the past 12 days. Gas prices tend to fall at this time of year. Refiners make a cheaper blend of gasoline for the cooler months, and people drive fewer miles.
This year, tepid economic growth means the chance of slower than normal demand. That’s why gasoline futures have plunged 12 per cent in less than two weeks, including a six-cent drop yesterday to US$2.59 per gallon.
This week, jitters on Wall Street have migrated to the energy markets. 3M Co, with products ranging from Scotch tape to traffic sign coatings, and Posco, the big Korean steel maker, were among the major companies yesterday that cut forecasts because of weak economic growth in China and Europe.
Caterpillar Inc, the big machinery company, did the same on Monday. That gloominess has sent most global stock markets sharply lower. Yesterday’s move lower left US crude poised “for a test on the 61.8 per cent retracement of the US$77.28 to US$100.42 move at US$86.12, and possibly below,” Michael Fitzpatrick, editor-in-chief, wrote in the industry newsletter EnergyOverview.
US November heating oil slumped more than one per cent. It was down 3.54 cents at US$3.0413 a gallon, having fallen during the session to US$3.0193, below the 200-day moving average of US$3.0278. US November RBOB gasoline retreated nearly two per cent, and Tuesday’s low trade of US$2.5690 a gallon was the weakest for gasoline since June.
Oil prices also felt pressure from expectations that US oil inventories likely rose last week as imports recovered, according to analysts polled by Reuters on Monday. Crude inventories were expected to have risen 1.7 million barrels for the week ended October 19.
The slide in crude prices on Tuesday came even as the potential remains for Middle East turmoil to cause a disruption to the region’s oil supply. Iran said on Tuesday it would stop oil exports if pressure from Western sanctions got any tighter and that it had a “Plan B” contingency strategy to survive without oil revenues.
Major powers may ask Iran for stricter limits on its nuclear work if it wants an easing of harsh sanctions—a long-shot approach aimed at yielding a negotiated solution, according to Western diplomats. Syrian rebels were attempting to seize an army base close to the main north-south highway.
Rebels say capturing the base would help create a “safe zone” allowing them to focus on President Bashar al-Assad’s southern strongholds. Fears that Syria’s conflict could envelope its neighbors and affect the key infrastructure and production in the region have been supportive to oil prices.
In other energy futures trading in New York:
• Heating oil fell five cents to end US$3.02 per gallon.
• Natural gas rose seven cents to US$3.52 per 1,000 cubic feet.
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