Oil prices dropped on Wednesday after US government data showed a larger-than-expected increase in crude oil and petroleum inventories and the threat of Hurricane Wilma to US oil production and refining facilities diminished.
The US Department of Energy said crude inventories rose 5.6m barrels for the week ended October 14 to a total of 312m. Petrol stockpiles were up 2.9m barrels at 195.7m barrels.
The weekly report showed US oil production recovering from the damage caused by hurricanes Rita and Katrina, together with an increase in imports of both crude oil and petroleum products. The report also showed that US demand remained weaker over the past four weeks than it did over the same period last year.
Wilma, now the strongest hurricane on record, is expected to pass Cuba this week and turn towards Florida, bypassing the already damaged Texas and Louisiana facilities. Wilma is, however, still threatening to disturb US oil production if it changes course.
IPE Brent for December delivery dropped 68 cents to settle at $58.60 a barrel in London trading, with most of the fall occurring after the release of the weekly report. November Nymex West Texas Intermediate dipped 79 cents to close at $62.41 a barrel in New York trading.
The Organisation of the Petroleum Exporting Countries is concerned about high oil prices and is increasing its production capacity by 5.5m barrels a day within five years, according to Adnan Shihab-Eldin, Opec’s acting secretary general. Opec can pump 32.5m b/d and is forecast to increase that to 38m b/d by 2010.
While oil prices were down, frozen orange juice futures hit fresh 6-year highs over fears that Wilma will hit Florida’s citrus groves. The benchmark November FCOJ contract surged to a contract high of 114.50 cents a pound, the highest price since December 1998.
Gold fell for a third consecutive trading session in London as the stronger dollar and drop in oil prices damped sentiment.
Fears of potential gold sales by hedge funds and other large speculators also depressed prices. Bullion dipped to $465.00/465.80 a troy ounce, down more than $6 from its late New York quote on Tuesday.
It is down $17 from a near 18-year peak reached a week ago. Many gold analysts warn of a price correction as it has been driven to new peaks by speculative money and not increased demand.
Platinum, however, rose $3 to $930/934 from its late New York quote on Tuesday.
Copper remained volatile but continued to fall from the last week’s record highs. Three-month copper was trading at $3,932.5 on the London Metal Exchange, down $25 on the day.
