  Crude Oil Dips and Looks Set to Close The Week At Lower End Of Trading Range
Reported by Proactive Investors on Friday, 20 November 2009 (on November 20, 2009)
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After a back-and-fourth week, crude oil prices are set to finish near the lower end of its established range between $75 and $82. Yesterday, crude prices tumbled as fears grew surrounding to on-going economic recovery. Analysts have increasingly doubted the sustainability of $80 oil under current conditions.
The broad based selling and general pessimism among investors pressure the crude oil market as the oil price slipped over 2.5% lower last night. On Thursday, the European session started brightly enough and held relatively unchanged at around $79.50 until the US pre-market indications showed a weaker session was ahead. Throughout the day both equities and oil fell with WTI futures ending the day at around $78 per barrel.
On Wednesday improved inventory data provided some support holding crude prices near $80. The U.S. Department of Energy report showed an 887,000 barrels decline in crude stocks, which was about 200,000 barrels less than analyst’s average expectations. Similarly gasoline stocks fell further than anticipated, with a drop of 1.7 million barrels. In broad terms the data reflected earlier reports from the American Petroleum institute (API).The API reported a 4.3 million barrel draw-down in crude inventories last week. Many analysts and commentators are pointing to reduced production, processing and oil transportation in the Gulf of Mexico caused by Hurricane Ida last week as the reason.In previous weeks, many analysts have referenced the fact that US inventories are currently at comparatively higher levels and raised doubts over the validity of $80 oil, based on current supply-demand dynamics.Analysts identified the weak dollar as the primary stimulant in crude oil’s recent rise to $80. Some suggested that the weak dollar has been masking the fundamental supply and demand issues in the underlying energy market which are claimed to imply that prices should be lower.
In London equity trading was mixed, with most major oil and gas stocks rising. BG Group (LSE: BG) and Cairn Energy (LSE: CNE) advanced 1.2%, while Petrofac (LSE: PFC) and Tullow Oil (LSE: TLW) posted marginal gains. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) were flat.
Midcaps were mixed. Dragon Oil (LSE: DGO) posted losses of less than 1%, Dana Petroleum (LSE: DNX) rose marginally, while Heritage Oil (LSE: HOIL) emerged as the leading riser among the midcaps, tacking on nearly 4%.Junior energy companies did not show much movement in the morning. Europe focused oil and gas developer Ascent Resources (AIM: AST) was among the strongest performances with a gain of 3%, while US focused oil and gas junior Caza Oil & Gas (AIM: CAZA) lost 4.5%.
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