Oil Falls on Increase in U.S. Supplies of Natural Gas, a Competing Fuel Oil Falls After IEA Says It Will Release Stockpiles, If Needed
By Mark Shenk
Aug. 28 (Bloomberg) -- Crude oil fell more than $2 a barrel after the International Energy Agency said it would tap strategic stockpiles, if needed, because of Tropical Storm Gustav.
The IEA coordinated the release of crude oil and fuel supplies after hurricanes Katrina and Rita struck the U.S. Gulf Coast in 2005. Gustav packed maximum sustained winds of almost 70 miles (113 kilometers) per hour at about 11 a.m. Miami time and may regain hurricane strength of at least 74 mph today, the National Hurricane Center said.
``The IEA is making the right soothing noises to calm the market,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``Anyone who follows the industry would expect them to release supplies if there was a great deal of damage, but this is an emotional market and words can do a lot.''
Crude oil for October delivery fell $2.75, or 2.3 percent, to $115.40 a barrel at 12:28 p.m. on the New York Mercantile Exchange. Prices are up 61 percent from a year ago. Oil has dropped 22 percent from a record $147.27 reached on July 11.
Prices also fell because U.S. stockpiles of natural gas, a competing fuel, increased more than analysts forecast. Supplies rose 102 billion cubic feet to 2.757 trillion cubic feet last week, the U.S. Energy Department said today. A gain of 84 billion was expected, according to a Bloomberg News survey.
``This is a really bearish natural gas number,'' said Kyle Cooper, an analyst at IAF Advisors in Houston. ``All attention was focused on the storm before the report.''
Natural gas for October delivery tumbled 74.4 cents, or 8.6 percent, to $7.864 per million British thermal units in New York.
The Gulf of Mexico is home to 26 percent of U.S. oil output and 14 percent of the country's gas production.
``If the storm remains on this track, prices will start to rise again,'' said Tom Bentz, a broker at BNP Paribas in New York.
Brent crude oil for October settlement fell $2.24, or 1.9 percent, to $113.98 a barrel on London's ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at email@example.com.