25 October 2005, 16:26  Oil prices slip as mkt looks for new clues on US demand, Wilma threat eases

Oil prices were lower, extending yesterday's losses, as the market looked to tomorrow's weekly US stocks data for new clues on oil demand, and after Hurricane Wilma spared vital energy facilities in the US Gulf of Mexico. At 12.19 am, December-dated Brent futures contracts were down 34 cents at 57.90 usd a barrel, while US benchmark December-dated contracts were down 29 cents at 60.10 usd. Sucden analyst Sam Tilley said that with Hurricane Wilma having made landfall in Florida yesterday, sparing oil facilities in the Gulf, the market is now looking towards tomorrow's weekly snapshot of US inventories for clues on US oil demand. "The market has continued to be pressured on the easing of demand concerns, as demand in the US has slowed while inventories have held up quite well, with heating oil stocks still slightly above year-ago levels even with Hurricanes Katrina and Rita," he said. US distillate stocks -- heating oil and diesel fuel -- are expected to have fallen by 900,000 barrels in the week ended October 21, while crude stockpiles are likely to have risen by 2.3 mln barrels due to heavy imports, according to forecasts from Sucden. "The previous two hurricanes are now well evaluated and the industry has as a result become a bit more confident in last week or two," said Manoucheht Takin of the London-based Centre for Global Energy Studies, adding prices were also easing on expectations of falling demand. However, he noted that while there has been evidence that high oil prices have dented demand for products in the US, with consumers making efforts to conserve energy by, for example, driving less, there has been debate about how to interpret the data. "The statistics did show a clear decline in demand but there has been a debate about whether this was a temporary reaction to high prices ... with some saying we should not take it as a new trend and others saying we should," he said. Tilley, for example, said the change in consumer sentiment in the US should shift the track of oil demand growth and hopefully ease oil prices. Takin, however, pointed out that with the upcoming winter in the northern hemisphere, prices are still supported. "In general, in the next four to five months the market will remain firm. We cannot expect crude prices to come down to 50 or 40 usd per barrel because we are still going into winter," Takin said. Four US oil refineries accounting for 1.03 mln bpd of fuel production or 6 pct of US capacity remain shut in in the aftermath of Hurricanes Katrina and Rita, while about two-thirds of US Gulf of Mexico oil production is also shut in.

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