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2009-01-20 08:05:21
By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer
2 hrs 35 mins ago
SINGAPORE Oil prices fell below $34 a barrel Tuesday in Asia as traders sold
the expiring front-month Nymex contract due to a lack of space at a key U.S.
storage facility.
Light, sweet crude for February delivery was down 65 cents at $33.90 a barrel
by late afternoon in Singapore in electronic trading on the New York Mercantile
Exchange. The contract, which expires on Tuesday, fell $1.96 overnight to
settle at $34.55.
The February contract has fallen about a third in two weeks, in part because
burgeoning supplies in Cushing, Oklahoma, the delivery point for the Nymex
contract, have left traders with little space to store crude, forcing them to
sell.
Traders say some oil firms are storing crude on rented tankers.
"There's too much oil in the world right now, and that oil is trying to find a
home," said Stephen Corry, head of investment strategy for Merrill Lynch in
Hong Kong. "We're finding surplus oil is being put in tankers ... and the price
of future contracts is higher in order to offset the storage cost."
Investors have turned their attention to the March Nymex contract, which is
trading at $40.32 a barrel, and the March Brent, which is at $43.86 a barrel on
the ICE Futures exchange in London.
"The true price of crude today is somewhere between $40-$45 a barrel," said
Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
The oil market was closed in the U.S. on Monday for Martin Luther King Jr. Day.
Weighing on all the contracts is a severe recession in developed countries and
a slump in global oil demand. Hundreds of U.S. companies report fourth quarter
earnings this week, and investors are fearing the results could show the
economic slowdown is deepening.
"The global economy remains the driver of oil so there's a lot of downward
pressure," Shum said.
Goldman Sachs said Monday the price of oil could fall below $30 a barrel in the
short-term before rising to $65 in the fourth quarter.
Investors will also be eyeing the inauguration of President-elect Barack Obama
on Tuesday for any hints regarding the government's economic and energy
policies.
In other Nymex trading, gasoline futures fell to $1.12 a gallon. Heating oil
dropped to $1.41 a gallon while natural gas for February delivery slid to $4.69
per 1,000 cubic feet.