No news is good news, as price falls further oil prices

12 November 2004
Oil prices fell by a further $2 a barrel in the second week of November, compounding a fall of some $5 a barrel at the start of the month. No change in fundamentals warranted such a dramatic slide. Instead, bearish sentiment seems to have embraced the market after months of relentless upwards movement. Spot Brent was trading at $43.62 a barrel on 10 November, compared with $45.27 a week earlier and more than $50 in late October.

Few new supply threats appeared over the course of the week. In Iraq, the northern oil export pipeline is reported to be shut again, having briefly reopened in the wake of a flurry of sabotage attacks at the beginning of November. Oil Minister Thamir Ghadhban said on 4 November that security measures, including airborne surveillance, were being put in place to guard against future sabotage. In Nigeria, the unions are standing by their threat of an indefinite general strike from 16 November in protest at unpopular economic reforms.

US stock data released on 10 November showed the seventh consecutive weekly stock build, by 0.6 per cent to 291.5 million barrels. Distillates were flat at 115.6 million barrels. Immediate fears of a winter heating oil shortage have eased somewhat as meteorologists predict good weather over the next couple of weeks. However, analysts warn that stocks are still well below the five-year average and refinery utilisation has yet to recover from hurricane damage in September.

The International Energy Agency (IEA) published its latest annual report on 10 November, acknowledging that supply fears rather than a genuine lack of crude were largely responsible for recent price highs.

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