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Oil Trades Near $90 a Barrel After Falling on Demand Outlook
By Christian Schmollinger and Gavin Evans
Dec. 19 (Bloomberg) -- Crude oil traded near $90 a barrel in New York after falling the past four days on speculation slowing global economic growth and forecast mild weather in the U.S. may curb demand.
The European Central Bank yesterday injected a record $500 billion into the banking system to free up the global credit market after the collapse of subprime home lending in the U.S. Temperatures in the U.S. Northeast, the nation's largest heating oil consuming region, may be above average next week, the National Weather Service said.
``These efforts by the central banks haven't fully restored confidence in the financial markets so we continue to have this stalemate in the oil markets,'' said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. ``The concern about the near-term U.S. economic outlook keeps weighing on the oil market.''
Crude oil for February delivery was at $90.40 a barrel, up 32 cents, in after-hours electronic trading on the New York Mercantile Exchange at 10:40 a.m. in Singapore.
The contract dropped 97 cents, or 1.1 percent, to $90.08 yesterday, taking its four-day decline to 4.5 percent. It jumped to $93 yesterday after Turkish forces crossed into northern Iraq to attack Kurdish rebels before withdrawing.
The January crude oil contract expired yesterday, falling 14 cents to $90.49 a barrel, the lowest close in a week.
``It's definitely the demand outlook,'' said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``The cash injection by the European Central Bank looks a little questionable in terms of their outlook. Obviously they are worried that what happened in America really hasn't been accounted for fully in Europe yet.''
Iraq, Brent
Brent crude for February settlement was at $90.57 a barrel, up 45 cents, London's ICE Futures Europe exchange at 10:22 a.m. Singapore time. It closed 1.3 percent lower at $90.12 yesterday.
Iraq has the world's third-biggest proved oil reserves. Turkey has been fighting the Kurdistan Workers' Party, which is seeking autonomy for Turkey's largely Kurdish southeast and uses northern Iraq as a base.
``The Turkish incursion doesn't look like as much of a threat as when we first learned about it,'' Phil Flynn, a commodities trader for Chicago-based Alaron Trading Corp., said yesterday.
Exports from northern Iraqi oil fields to Turkey's Ceyhan terminal on the Mediterranean Sea averaged 400,000 barrels a day last month, the most since the U.S.-led invasion in March 2003.
An Energy Department report today will probably show U.S. crude oil stockpiles fell for a fifth week as increased refining bolstered gasoline inventories for a sixth week, according to a Bloomberg News survey of 17 analysts.
Gasoline Gains
Oil inventories probably fell 1.5 million barrels, while gasoline gained 800,000 barrels. Distillate supplies, including diesel and heating oil, probably fell 810,000 barrels.
``That seems like a neutral to bearish report,'' Altavest's Hartmann said. ``If we break below $90, the front-month will fall rather fast.''
U.S. refiners are running down stockpiles to avoid year-end tax penalties imposed in some states and after the higher cost of near-dated oil contracts discouraged inventory-building.
New York oil futures have been backwardated most of the past five months, as threats of supply disruption prompted investors to pay more for near-term delivery than later-dated contracts.
That premium eroded the past week, leaving February oil at a 1 cent discount to the March contract yesterday.
``February through April are basically the same price,'' Altavest's Hartmann said. ``That is beginning to show that perhaps the market feels there is adequate supply.''
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net ; Gavin Evans in Wellington at gavinevans@bloomberg.net
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