Crude oil futures nose-dived for a second day in a row yesterday, briefly dipping below $43 a barrel, as traders focused on rising fuel supplies and mild fall weather in the Northeast and Midwest.
The two-day drop of more than $5 a barrel brought the price of oil to more than $12 below the peak set in late October. Retail prices for regular unleaded gasoline have fallen nationwide in the last month to about $1.94 per gallon from $2.02, according to a AAA auto club survey.
After falling as low as $42.50 per barrel, light, sweet crude for January delivery settled at $43.25 per barrel, a decline of $2.24 on the New York Mercantile Exchange. It's the lowest settlement price since Sept. 10.
Heating oil futures plunged 7.21 cents, to $1.2572 per gallon on the Nymex, more than 33 cents below their October peak, and natural gas futures fell 60.2 cents, to $6.811 per million British thermal units. Gasoline futures slid 5.98 cents, to $1.1414 per gallon.
Petroleum prices have been high all year because of strong global demand, a tight supply and fears of output disruptions in Iraq, Nigeria and Russia. In September, a strong hurricane knocked out significant oil production in the Gulf of Mexico, though the region's output is now recovering.
Plummeting oil prices over the past two days helped lift the stock prices of airlines such as American and Northwest, which have been financially bruised by expensive jet fuel. In contrast, share prices of independent oil refiners such as Valero Energy Corp. and Tesoro Corp. and drilling contractors such as Noble Corp. and GlobalSantaFe Corp. fell.
The downward momentum in oil prices was fueled yesterday by a revised natural gas supply report from the Energy Department, which last week had mistakenly underestimated the amount of natural gas in storage.
The sell-off in oil futures was also bolstered by comments from an Organization of Petroleum Exporting Countries official that the group is likely to keep production at current levels when it meets next Friday.
"It doesn't surprise me, to be honest. We've been looking for lower oil prices for some time," said Jason Kenney, an analyst at ING Financial Markets in London.
Oil prices plunged more than $3 a barrel, or 7 percent, Wednesday after the Energy Information Administration reported that the nation's supply of distillate fuel, which includes home heating oil, grew by 2.3 million barrels last week, to 117.9 million barrels. Heating oil futures sank 8.9 cents, or 6 percent, on Wednesday.
U.S. crude oil inventories grew by 900,000 barrels last week, to 293.3 million barrels, the Energy Department's statistics and forecasting division said.
Andrew Lebow, senior vice president at Man Financial Inc. in New York, said that while the nation's supply of heating oil remains tight for this time of year, the situation is not as dire as feared because of the relatively mild fall so far in the Northeast and Midwest, the main consuming regions for heating oil. "The need for that cushion becomes less and less," he said.
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