Oil Update – January 26, 2012

Crude Oil Price: $99.70 at 3:07 PM

Crude Ends At $99.70; IEA Assures On Supply

Crude oil futures settled little changed and below $100 a barrel after the West’s energy watchdog reiterated that it doesn’t see any disruption in oil supplies now, but could tap emergency stockpiles if needed.

The comments, from the head of the International Energy Agency, came after oil prices had climbed 2% earlier after Iran said it was considering an immediate halt to crude oil exports to the European Union. That move, Iran said, would be in response to the EU trade embargo set to take effect July 1. Iran sells about 600,000 barrels a day of crude to EU nations.

An Iranian lawmaker said the parliament will consider the cutoff at a meeting on Sunday. Such a move would send European oil buyers scrambling for replacement supplies, closing the six-month window the EU built into its embargo plan agreed upon earlier this week. The EU set the embargo to ratchet up pressure on Tehran to halt its nuclear program. But Iranian lawmakers want an abrupt halt of the exports–accounting for 5.8% of EU needs in 2010–in order to push prices higher and hurt European economies.

Maria van der Hoeven, IEA executive director, said there isn’t a need for an emergency oil release now, but the agency continues to monitor the oil markets in light of mounting tensions over Iran.

“Emergency stocks are there, but they can only be used if there is a real, very serious disruption of supplies,” van der Hoeven said Thursday. “And at this moment, this is not the case.” She repeated the IEA view that global oil markets remain tight despite concerns about slowing economic growth. Analysts said that makes the market ripe for a spike on any break in the normal supply chain.

“Any time you start taking any oil off the market, there’s upward pressure on prices. The market will react instantaneously and then wait to see if the gap is filled,” said Tom Bentz, a director of BNP Paribas Prime Brokerage.

Light, sweet crude oil for March delivery on the New York Mercantile Exchange settled up 30 cents at $99.70 a barrel, a one-week high. The contract rose 2% intraday to a high of $101.39 a barrel, and fell late in the session to a low of $99.23 a barrel.

ICE Brent crude for March settled 98 cents higher, at $110.79 a barrel. That was the biggest rise since Jan. 4.

“Iran likes to talk a lot, but whether they will follow through remains questionable,” said Gene McGillian, analyst at Tradition Energy. “For now, the market seems to have found an area around $100 a barrel that it wants to float around.”

“It’s a scary situation right now,” said Bentz, adding that tensions over Iran add about $5-$10 a barrel to current prices. In response to U.S.-led efforts to tighten sanctions, Iran has at times threatened to close the Strait of Hormuz, the vital shipping outlet for about 20% of the world’s oil.

Ali Naimi, Saudi Arabia’s oil minister, said recently that the kingdom’s oil output could be quickly increased to around 11.8 million barrels a day, while it would take about 90 days to bring production to capacity of 12.5 million barrels a day. The Saudis said they pump 10 million barrels a day in November, and the IEA estimated the December flow at 9.85 million barrels a day.

Meantime, U.S. oil data shows the level of demand than can be met by stockpiles continued to top five-year average levels. But the cushion is the smallest in two months.

Traders said the market, which is still seeking clear signals of a sustained economy recovery, got another mixed picture Thursday.

Jobless claims rose by 21,000 last week, slightly below the expected increase of 23,000. December orders for durable goods rose for a third straight month, with the 3% rise topping economists’ forecasts for a 2% gain. But new-home sales decreased by 2.2% in December after three monthly rises. Economists’ forecasts had called for a 1.9% rise.

February heating oil futures settled 3.43 cents higher, at $3.0535 a gallon. The rise was the biggest since Jan. 4 and put prices at the highest level since Jan. 12.

Oil Update – January 19, 2012

Crude Oil Price: $100.39 at 2:10 PM

Crude Edges Lower After US Oil Data

Crude oil futures eased Thursday, settling modestly above $100 a barrel after U.S. data showed oil demand in the last four weeks fell to a 15-year low.

Prices had topped $102 early in the session, spurred by news that U.S. weekly jobless claims fell to the lowest level since April 2008.

Those gains were shattered by data from the Energy Information Administration that showed oil use in the world’s biggest oil consumer slumped 7.2% from a year earlier in the last four weeks, and was the weakest since April 1997.

Demand for gasoline, the most widely used petroleum product, fell to an 11-year low below 8 million barrels a day in the week ended Jan. 13, the EIA said. U.S. output of gasoline exceeded demand by a record 9.5% in the week, leading to bigger-than-expected rise in inventories. Gasoline stocks are sufficient to cover 28.5 days, a 13-year high, the EIA data show.

“The gasoline side doesn’t look good at all,” said Gene McGillian, analyst and broker at Tradition Energy in Stamford, Conn. “But we are seeing signs of some kinds of positive aspects for the market,” he said, noting the jobless claims report.

Light, sweet crude oil for February delivery settled 20 cents lower, at $100.39 a barrel on the New York Mercantile Exchange. The February contract, which expires at Friday’s settlement, traded to a session high of $102.06 a barrel for the second straight day. March crude settled 22 cents lower, at $100.54 a barrel.

North Sea Brent crude oil on the ICE futures exchange settled 89 cents higher, at $111.55 a barrel.

Reformulated gasoline blendstock futures for February settled 0.96 cent lower, at $2.8158 a gallon, while February heating oil rose 2.26 cents, to $3.036 a gallon.

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Oil Update – January 12, 2012

Crude Oil Price: $100.87 at 3:00 PM

Crude Slides in Late-Day Selloff

Oil futures fell nearly 2% in a late-day selloff after reports emerged saying the European Union’s possible embargo of Iranian oil imports would likely be delayed up to six months. New York Mercantile Exchange crude ended up closing below $100 a barrel for the first time in 2012.

Light, sweet crude futures for February delivery ended the day down $1.77, or 1.8%, at $99.10 a barrel on the Nymex. Brent crude on the ICE Futures Europe exchange was down $1.06, or 1%, at $111.18 a barrel. Nymex futures had not closed below $100 a barrel since Dec. 30.

European Union officials announced an agreement in principle Jan. 4 to halt imports of Iranian oil because of Iran’s nuclear development program, sending the oil market higher that day to a close of $103.22. Still, the announcement at the time lacked a concrete timeline and offered little in the way of precise parameters.

Iran is the world’s third-largest oil supplier, exporting 2.5 million barrels per day to global markets. If European countries reduced use of Iranian oil, it would increase dependence on other sources, tightening the global supply-and-demand balance.

Futures had been trading higher all day Thursday, driven higher by word of a possible shutdown of Nigerian oil exports and a stronger euro, even as the market looked past bearish new economic data and weak U.S. fuel demand fundamentals. But it began a steep selloff with less than an hour to go in the session as multiple news agencies, citing unnamed EU officials, said Europe’s Iran oil embargo could be delayed.

“That’s been the real driver behind this late-day selloff,” said Matt Smith, an analyst at research firm Summit Energy. “That’s been the only thing keeping prices in triple digits. Once you take the Iranian piece out of the puzzle, we’re left with poor economic data and poor U.S. fundamental crude data. This is definitely an unwinding of that [Iran] premium.”

Front-month February reformulated gasoline blendstock, or RBOB, lost 3.2 cents, to $2.7313 a gallon. February heating oil dropped 1.05 cents to $3.0541 a gallon.

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Oil Update – January 5, 2012

Crude Oil Price: $101.81 at 2:52 PM

Crude Settles Drops After US Spill Data

Crude oil futures prices slumped below $102 a barrel Thursday as worries over near-term weak U.S. oil demand eclipsed concerns over the potential disruption to Iran’s oil supplies.

The Energy Information Administration said inventories of crude oil and key refined petroleum products in the U.S., the world’s biggest oil consumer, rose far more than expected last week. The stockbuilds came as total demand in the week ended Dec. 30 slumped to a 14-year low for the last week of the year. At just over 18 million barrels a day, U.S. oil use was 1 million barrels a day below the year-earlier level.

Crude oil stocks rose 2.2 million barrels against an expected drop of 900,000 barrels, while increases in inventories of gasoline and distillate fuel (heating oil and diesel) were up by even greater amounts.

Demand for gasoline, the most widely used petroleum product, was at a 13-year low for the last week of the year, and was 3.4% below a year ago, the EIA data show.

“The numbers are bearish, there is no doubt about it,” said Carl Larry, analyst at Oil Outlooks and Opinions.

Prices tried to rebound after the data, but a reversal in gains in equities prices spurred a late bout of selling.

Light, sweet crude oil for February delivery on the New York Mercantile Exchange settled $1.41, or 1.4%, lower at $101.81 a barrel. Prices had surged 4.4% in the previous two days on rising tensions as the U.S. and Europe have moved to tighten sanctions on Iran over its nuclear intentions. Iran has said it could shut down the vital Strait of Hormuz waterway, which is the exit route from the oil-rich Gulf of 20% of the global daily oil consumption.

ICE North Sea Brent crude oil fell 96 cents to $112.74 a barrel. The European Union said Wednesday it reached an agreement in principle to impose an embargo on Iranian crude oil imports, but has yet to finalize details. Traders said Brent prices would be poised to gain as European refiners search for alternative supplies in the event of an embargo.

Traders and analysts estimated that oil prices currently include a $5 to $10 premium on uncertainty over the Iran issue. Kyle Cooper, managing partner at IAF Energy Advisors in Houston, said that will continue to underpin U.S. prices near $100, even in the face of “horrific” U.S. demand data.

“The demand picture is dismal” in the U.S., Cooper said. “But from a trading standpoint, it is very difficult to be short,” or take a market position that assumes a decline in prices.

Cooper said recent movements of U.S. Navy ships in the region show that the U.S. would intervene to keep oil flowing from the region in the event of any effort by Iran to disrupt supplies. “A price spike is a foregone conclusion” in the event of any regional hostilities, he said, but he expressed doubts over the likelihood of a long-term supply disruption.

The U.S. is urging major importers of Iranian oil to “significantly” cut their purchases and subsequently could provide a number of countries exceptions under a new sanctions law in exchange for finding supplies elsewhere, according to government officials and people familiar with the matter. Iran’s Foreign Minister Ali Akbar Salehi said Thursday his country is “not concerned” about European Union moves to ban Iranian oil imports and will survive them as it has other Western sanctions.

Meantime, the Organization of Petroleum Exporting Countries produced just over 31 million barrels of oil a day in December, a Dow Jones Newswires survey shows. That’s 1 million barrels a day above the 30 million-barrel-a-day production ceiling agreed to in mid-December. Analysts said it remains to be seen how much OPEC may reduce output given current high prices.

Reformulated gasoline blendstock futures for February delivery settled 4.87 cents lower, at $2.7365 a gallon. February heating oil futures settled 5.11 cents lower, at $3.0388 a gallon. Both drops were the biggest one-day declines since Dec. 14.

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Oil Update – December 29, 2011

Crude Oil Price: $99.65 at 3:33 PM

Crude Gains, Pulled Higher By Equities

Crude futures ended higher Thursday, bouncing back from midday losses as stock markets rallied and U.S. oil stockpiles posted modest increases.

Nymex light, sweet crude for February delivery settled 29 cents higher, or 0.3%, at $99.65 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures exchange traded 55 cents higher at $107.96 a barrel.

After a midday dip into negative territory, oil prices were pulled along by a rally in equities, which rose on data showing improvement in the U.S. housing and employment sectors.

The Dow Jones Industrial Average, which has served as a guidepost for the oil market in recent months as crude traders eye economic sentiment, was recently 108 points higher at 12261.

The increase in the stock market was coupled with weekly U.S. oil inventory data from the Department of Energy. The agency said Thursday that U.S. oil inventories rose by 3.9 million barrels in the week ended Dec. 23.

While the results were above analysts’ average estimate, Peter Donovan, a vice president and broker at Vantage Trading in New York, said the report inspired some relief buying after the American Petroleum Institute, an industry group, released its own data Wednesday showing a much larger 9.6 million-barrel build.

“The Energy Department build was just so much less than the API number,” Donovan said.

Still, the report also showed a drop in implied demand for fuel products, suggested that the massive 10.6 million stockpile decline in the week-earlier report was a one-time event linked to year-end shuffling of inventory by refineries.

Stockpiles of distillates, which include heating oil and diesel, increased by 1.2 million barrels. Gasoline stockpiles fell by 700,000 barrels after analysts had expected a 500,000-barrel drop.

Futures have hung near the $100 a barrel mark for most of December. Improving economic data in the U.S., the world’s largest oil consumer, has created expectations of rising demand. But weakness in Europe continues to drag down crude and other commodities as investors worry about the consequences of the region’s debt crisis.

“In Europe there are still a lot of worries,” said Phil Flynn, an analyst at PFGBest. He added that price moves could be exaggerated this week due to light volumes.

Meanwhile, statements from the U.S. and Iran regarding the Strait of Hormuz have raised tensions in the oil-producing region and helped put a floor under prices.

The U.S. Navy force stationed in the Persian Gulf maintained normal interaction with its Iranian counterpart as Tehran conducts war games in the Gulf. On Wednesday, the U.S. military warned against any attempt by Iran to close the strait, which handles roughly 15 million barrels of oil a day.

“Any attempt to close the strait will not be tolerated,” George Little, the Pentagon press secretary, said. “The strait is an economic lifeline for countries in the Gulf, including Iran.”

The statement came in response to earlier threats by Iran to shut the channel if the West pressed ahead with sanctions over the nation’s nuclear program.

“If our enemies in the West start conspiring against us, we’ll take strong action to put them in their place,” said First Vice President Mohammad Reza Rahimi in a speech to Iranian students Tuesday.

Front-month January reformulated gasoline blendstock, or RBOB, settled 2.88 cents, or 1.1%, higher at $2.6801 a gallon. January heating oil settled 2.41 cents higher at $2.9175 a gallon.

Oil Update – December 22, 2011

Crude Oil Price: $98.67 at 3:33 PM

Crude Prices Flirt with $100 a Barrel

Crude futures rallied Thursday and flirted with $100 a barrel, rising with equities on improved U.S. economic data and continued momentum from a report Wednesday showing a tightening oil-supply picture.

Light, sweet crude for February delivery ended the day up 86 cents, or 0.9 percent, at $99.53 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange was up 12 cents, or 0.1 percent, at $107.83 a barrel. Volume was about one-third of normal levels because of the holiday week.

Futures prices touched the $100-a-barrel threshold twice during the day, for the first time since last week. Oil traders chose to look past weaker economic data, with third-quarter U.S. economic growth revised downward. Traders and analysts said the market appeared primed to drive higher, ignoring what would ordinarily be caution signals.

“Wall Street wants to end this happy, happy year with oil above the psychologically important $100 level, and who’s to argue with the best and brightest the Ivy League has to offer?” said Stephen Schork, analyst and editor of The Schork Report. “It’s like fighting city hall. You can’t fight it.”

The Labor Department said initial jobless claims fell unexpectedly last week, decreasing 4,000 to 364,000 in the week ended Dec. 17, reaching the lowest level since April 2008. The Conference Board’s index of leading economic indicators advanced for the seventh-straight month, and the Thomson Reuters/University of Michigan consumer-sentiment index rose.

Still, the Commerce Department said the U.S. economy expanded at an annualized rate of 1.8 percent during the third quarter, lower than its previous estimate and the analyst consensus of 2 percent.

Stocks rose, with the Dow Jones Industrial Average recently up 62 points to 12169. Oil often trades in tandem with equities. Analysts said the crude market was getting a continued boost from Wednesday’s U.S. Energy Information Administration report showing weekly oil inventories dropped 10.6 million barrels to 324 million barrels, the largest drop in more than a decade and a three-year low.

Oil’s gain “was kind of surprising, given the U.S. GDP number and everything else going on, unless it’s just a further knock-on effect from what we saw yesterday from inventories,” said Jason Schenker, president of Prestige Economics in Austin, Texas. “Market participants still continue to be ignoring the international problems and threats which are looming larger and larger every day, whereas they’re focusing on tepid improvements in the U.S. economy.”

Front-month January reformulated gasoline blendstock, or RBOB, ended up 1.99 cents higher at $2.6398 a gallon. January heating oil settled down 0.11 cent to $2.9076 a gallon.

Oil Update – December 15, 2011

Crude Oil Price: $93.87 at 3:09 PM

Oil Ends At Six-Week Low As Demand Worries Weigh

Oil futures pushed lower Thursday, ending at their weakest level in six weeks, as worries about global oil demand sent prices spiraling for a second session.

Light, sweet crude for January delivery settled down $1.08, or 1.1%, to $93.87 a barrel on the New York Mercantile Exchange. That marks the contract’s lowest settlement since Nov. 2.

The move is the second straight downward session for Nymex crude, which is off 6% over the last two days in a broad retreat driven by worries about Europe’s debt crisis and weak crude demand in the U.S.

January Brent crude on the ICE futures exchange settled up 7 cents, or 0.1%, to $105.09 a barrel. With the January contract expiring at the close of trading, the more heavily traded February contract recently traded down 64 cents, or 0.6%, at $103.26.

Crude began the day in positive territory, following a string of good U.S. economic reports. Jobless claims fell 19,000 last week to a seasonally adjusted 366,000, their lowest level since May 2008, the Labor Department said Thursday. A semiannual outlook from the Institute for Supply Management said manufacturers and nonmanufacturers see the U.S. recovery continuing in 2012.

The developments helped vault crude as high as $95.99 a barrel in intraday trading. However, futures reversed course midway through the session, as worries about Europe’s sovereign debt crisis and U.S. crude-oil demand remained in focus.

“The bounce never found any traction an it just slowly slipped as the day went on,” said Tom Bentz, a director at BNP Paribas Prime Brokerage Inc. in New York.

Equities also pared their gains through the afternoon. The Dow Jones Industrial Average recently rose 0.6% to 11889.8, off its intraday high of 11,967.8.

Market watchers said government data released Wednesday that showed falling U.S. oil demand continue to weigh on the market for a second straight day. The Department of Energy said oil demand fell by 1.8 million barrels last week. Oil imports fell 1.1 million barrels a day.

Meanwhile, International Monetary Fund head Christine Lagarde said at a Washington conference that the global economic outlook remains “quite gloomy.”

Oil traders have been closely following economic headlines this year, amid worries that the sluggish recovery is weakening demand for oil. Developments out of Europe and the U.S. have whipsawed prices above and below $100 a barrel several times this year, as traders weigh the economy’s ability to withstand high oil prices.

Several market participants say the recent rally above $100 wasn’t sustainable given the still-fragile recovery.

“I think it’s going to go lower,” said Mark Waggoner, president of Excel Futures, a commodities trading firm. “I think we’re headed for $89 a barrel. A couple days ago when I said that people laughed, but the market’s way overdone.”

Front-month January reformulated gasoline blendstock, or RBOB, settled down 1.6 cents, or 0.6%, to $2.4877 a gallon. January heating oil settled down 0.74 cent, or 0.3%, to $2.8225 a gallon.

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Oil Update – December 8, 2011

Crude Oil Price: $98.34 at 2:18 PM

Crude Slides 2.1% On European Debt Worries

Crude oil futures fell 2.1% to near $98 a barrel Thursday, posting the biggest decline in three weeks on continued worries about Europe’s sovereign debt.

Prices had posted early gains, approaching $102 a barrel, after a larger-than-expected drop in new claims for U.S. jobless benefits. The Labor Department said benefits filings in the week ended Dec. 3 fell by 23,000 and were at the lowest level in nine months. Economists had expected a 7,000 decline in the week.

But the weight of concerns, as European leaders begin a two-day summit meeting, hit equities price and crude tumbled. Oil, like all global markets, has been gripped by concerns in recent months that the crisis in European could trigger a global economic slowdown.

Those concerns were especially evident in the heating oil futures market Thursday, traders said, as prices fell to their lowest level since Nov. 25 on fears of a potential slowdown in U.S. exports of related diesel fuel. Latest U.S. government data show that 42% of record-high exports of distillate fuel (diesel/heating oil) in September were bound for Europe.

Light, sweet crude oil for January delivery on the New York Mercantile Exchange settled 2.1%, or $2.15 a barrel, to $98.34 a barrel. The price is the lowest since Nov. 28 and the decline was the biggest since Nov. 17. ICE North Sea Brent crude oil for January settled $1.42 a barrel, or 1.3%, lower at $108.11 a barrel. That’s the lowest price since Nov. 25.

“The situation in Europe swings between optimism and pessimism every single day,” said Tom Bentz, director at BNP Paribas Prime Brokerage in New York. “Lately, the market has built in a lot of optimism and I’m afraid of a letdown.”

The oil price weakness comes as U.S inventories of crude oil, gasoline and heating oil all showed larger-than-expected increases last week, according to a report Wednesday by the Energy Information Administration.

The rise in crude oil stocks pushed inventories above the five-year average level by 4.5 million barrels. Just two weeks ago, stocks were 3.6 million barrels below that mark. But because of rising refiner processing, crude stocks now cover just 22 days of refiner demand, the lowest level in three years and slightly less than the five-year average. In the key Gulf Coast refining region, crude stocks cover 21 days of refiner demand, the lowest level in four years, EIA data show.

Higher refinery operations pushed distillate output to a record high above 5 million barrels a day. U.S. demand for the fuel was up 7% from a year ago, while exports were up 21.7% from a year ago, according to most recent monthly data, for September. Distillate exports to Europe in September averaged 390,000 barrels a day, or 42% or record exports of 931,000 barrels a day in the month, EIA data show. U.S. distillate stocks are 2.5% below the five-year average for this time of year, but that’s the slimmest gap since October.

“Europe is more of a distillate economy and Europe is a large buyer of our exports,” said Andy Lipow, president of Houston-based Lipow and Associates. A slowdown in Europe would cut demand for those exports, he said.

The EIA also showed gasoline demand fell to a 10-year low for the week. Inventories hit a two-month high of 215 million barrels and were 4% above the 5-year average. That level of supply would cover 25 days of current demand, the highest level for the week since 1999.

Nymex heating oil for January delivery settled 5.26 cents, or 1.8%, lower at $2.9298 a gallon. That’s the lowest price since Nov. 25 and the drop was the biggest in a week.

Reformulated gasoline blendstock futures for January settled 2.03 cents lower at $2.566 a gallon, a one-week low.

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Oil Update – December 1, 2011

Crude Oil Price: $100.20 at 3:34 PM

Crude Snaps 4-Day Rise

Crude oil futures settled slightly weaker Thursday but held above the key $100-a-barrel level amid continued worries about the global economy and oil demand.

Because of worries over a rise in U.S. jobless claims, traders put a halt to a four-day rally that had lifted U.S. benchmark crude by 4.4%. The Labor Department said new applications for unemployment benefits rose for a second straight week, gaining 6,000 to 402,000 last week. Economists had called for a 3,000 decline.

Analysts said the failure of U.S. equities to continue higher after Wednesday’s huge rally, the biggest gain in the Dow Jones Industrial Average since March 2009, spurred profit-taking in oil futures throughout the session.

The market also paused to assess the impact of an unexpected rise in U.S. crude oil and distillate (diesel/heating oil) inventories last week against a backdrop of strong concern over the European sovereign debt crisis.

Kyle Cooper, managing partner at IAF Energy Advisors, said the concerted move by central banks to add liquidity to the global market, which lifted oil and equities Wednesday, also served to show the fragility of the situation. “The growth outlook is really bad” in Europe, he said. “Clearly, they are going to need a lot of help to avert a further financial meltdown.” A spreading economic slowdown would put downward pressure on oil prices, analysts said.

Light, sweet crude oil for January delivery on the New York Mercantile Exchange settled 16 cents lower at $100.20 a barrel. The contract seesawed around a $100 midpoint throughout the day. ICE North Sea Brent crude oil for January settled $1.53 a barrel lower, at $108.99 a barrel.

The spread between Nymex crude and Brent narrowed to $8.79 a barrel, from $10.16 a day earlier, and was the slimmest since March 8. Traders said Brent is under pressure from a faster-than-expected recovery in Libyan oil output. Libyan officials said output has climbed to more than half of the 1.6 million barrels a day it produced prior to the nation’s civil war. Demand for Brent during the civil war helped push the North Sea crude to a nearly $28-a-barrel premium to the Nymex price.

U.S. oil market fundamentals are back in the spotlight after unexpected large increases last week in stocks of crude oil and distillate fuel.

“U.S. oil balances [are] looking much less bullish” after the data, said Jim Ritterbusch, president of Ritterbusch and Associates.

The federal Energy Information Administration said Wednesday crude oil stocks rose 3.932 million barrels in the week ended Nov. 25 as refiners slowed processing rates and boosted imports. Analysts expected crude stocks to drop 500,000 barrels.

The data also showed a jump of 5.526 million barrels in distillate stocks (diesel/heating oil), compared with an expected drop of 1.1 million barrels. The rise came during persistent warm weather in the Northeast heating oil region, which analysts said cut demand.

Despite the rise, crude stocks are in line with five-year levels. Distillate stocks are 2.8% below the five-year average, but that gap has narrowed sharply from a 7.3% deficit in recent weeks.

Government forecasters said Wednesday that above-normal temperatures are expected to stretch from the Gulf Coast through the mid-Atlantic region and into the New York Harbor heating oil region in December. Earlier forecasts had called for equal chances of normal, above-normal or below-normal temperatures in the area.

Nymex January heating oil futures settled down 5.56 cents, at $2.9695 a gallon.

Michael Wittner, analyst at Societe Generale, said gasoline remains pressured by “the status quo of weak demand and high stocks.”

Four-week gasoline demand was down 2.9% compared with a year ago and the weakest for this time of year since 2000, the EIA data show. Gasoline inventories are 2.8% above their five-year average level.

Reformulated gasoline blendstock futures for January settled 0.05 cent lower, at $2.5579 a gallon.

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Oil Update – November 17, 2011

Crude Oil Price: $98.82 at 4:11 PM

Nymex Crude Tips Back Below $100 A Barrel

U.S. oil futures slid back below $100 a barrel Thursday, reversing the previous day’s gains, as doubts surfaced about the economy’s ability to stomach high oil prices.

Light, sweet crude for December delivery settled down $3.77, or 3.7%, to $98.82 a barrel on the New York Mercantile Exchange. The December contract is set to expire at the end of trading Friday. The more heavily traded January contract settled down $3.67, or 3.6%, to $98.93 a barrel.

Brent crude on the ICE Futures Europe exchange recently traded down $2.89, or 2.6%, to $108 a barrel.

Nymex futures pushed lower on a wave of selling, as traders thought twice about whether $100 crude was sustainable given the cracks in the global economy. A sinking stock market in the U.S., combined with intensifying worries about Europe’s sovereign debt crisis, took the wind out of a price rally that had dominated the oil market for the last several weeks.

“Crude oil prices above $100 a barrel are difficult to sustain in an era of weak demand and rising production,” said Tim Evans, energy analyst at Citi Futures Perspective in New York.

Prior to Thursday’s sell-off, Nymex crude prices had gained 32% since the start of October, helped along by signs of improvement in the U.S. economy and steps in Europe toward containing the continent’s sovereign debt crisis.

On Wednesday, news that Enbridge and Enterprise Product Partners planned to reverse the Seaway pipeline catapulted Nymex crude prices above $100 a barrel for the first time in four months. The 500-mile line currently ships oil from the Gulf Coast to Cushing, Okla., the Nymex delivery point. Traders expect the reversal will reduce the high inventory levels in the key oil hub and provide an outlet for inexpensive Midwestern crude to Gulf Coast refiners.

But many traders Thursday viewed the rally as too-much-too-soon. Not until the second quarter of next year will the pipeline begin shipping oil out of Cushing, the companies said. In the meantime, oil production in the Midwest is expected to keep growing and demand is unlikely to climb quickly anytime soon.

“We didn’t have a real good reason to continue moving higher,” said Tony Rosado, broker at GA Global Markets, an oil options brokerage, in New York.

Downbeat financial headlines also weighed on futures. The Standard & Poor’s 500 Index–a widely followed barometer for crude in recent months–recently declined 1.9% to 1214.

Meanwhile, news that Spain was forced to offer record euro-era yields at a government bond auction Thursday spurred concerns that the euro-zone is having difficulty containing its sovereign debt crisis. The development helped feed fears in the oil market about a broader economic slowdown and weaker crude demand.

“I’ve got Spanish bonds up on my screens,” said Stephen Schork, editor of the energy newsletter the Schork Report. “This is the market we have now.”

Front-month December reformulated gasoline blendstock, or RBOB, settled down 12.02 cents, or 4.6%, to $2.5071 a gallon. December heating oil settled down 5.14 cents, or 1.6%, to $3.0832 a gallon.

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