Wednesday, November 14, 2007
Federal official predicts that gas prices will rise 20 cents a gallon this month.
NEW YORK (AP) — Oil prices that last week seemed on an inexorable path toward $100 a barrel slid more than $3 to the $91 level Tuesday after the International Energy Agency cut its demand forecasts and said crude supplies are rising.
Prices also fell after diplomats said Iran has handed over blueprints key to its nuclear program, meeting a central United Nations demand and potentially defusing the country’s standoff with the West.
“One of the reasons that we’ve been strong on oil all year is concerns about Iran’s nuclear program,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Retail gasoline prices, meanwhile, rose further above $3 a gallon amid predictions prices will rise even more to catch up with oil’s recent advance to near $100 a barrel. The national average price of a gallon of gas rose 0.4 cent overnight to $3.105, according to AAA and the Oil Price Information Service. Oil futures have jumped 42 percent since late August.
Light, sweet crude for December delivery fell $3.45 to settle at $91.17 a barrel on the New York Mercantile Exchange. Only last Thursday, crude prices traded as high as $98.62, a record, and appeared headed for $100.
On Monday, EIA Administrator Guy Caruso predicted gas prices will rise another 20 cents a gallon by December to catch up with oil, according to Dow Jones Newswires. Gas prices peaked at $3.227 in late May. Diesel prices set a new record of $3.446 a gallon Tuesday, according to AAA and OPIS.
Those high prices appear to be cutting demand, the IEA said Tuesday. The IEA, an energy policy adviser to 26 predominantly Western industrialized nations, lowered its fourth-quarter oil demand forecasts by 500,000 barrels a day, and cut its demand forecasts for 2008 by 300,000 barrels a day. Year-over-year demand growth will now average 1.2 percent in 2007 and 2.3 percent in 2008, the IEA said.
At the same time, global oil supplies grew by 1.4 million barrels a day in October due to increases in OPEC supplies and production in China, Azerbaijan and Russia, the IEA said. The Organization of Petroleum Exporting Countries boosted output by 410,000 barrels a day in October, the IEA said.
“There are ... strong indications that high prices are depressing demand,” the IEA said in its monthly Oil Market Report.
Reports from the IEA are closely watched by energy traders and investors. Previous IEA predictions of strong fourth quarter demand and falling supplies have helped fuel crude prices.