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Oil down slightly as fiscal cliff talks continue

In afternoon trading, U.S. benchmark crude was down 21 cents to $90.66 a barrel in New York.

The Associated Press

12/28/2012

NEW YORK  — The price of oil fell slightly Friday, as the stock market drifted lower and efforts continued in Washington to strike a budget deal before the year-end deadline.

In afternoon trading, U.S. benchmark crude was down 21 cents to $90.66 a barrel in New York. In London, Brent crude, used to price various kinds of foreign oil, fell 47 cents to $110.33 a barrel on the ICE Futures exchange.

Hopes that a budget compromise might be reached were still alive as congressional leaders met with President Barack Obama at the White House. The Republican-dominated House is set to meet Sunday and stay in session until Jan. 2, the day before the new Congress is sworn in. Without a budget deal, automatic tax hikes and government spending cuts could send the economy into recession, economists say.

Traders are also weighing rising energy supplies.

Phil Flynn, of the Price Futures Group, said that a government report Friday showed U.S. oil production hit its highest point since March of 1993, at nearly 7 million barrels per day.

The Energy Department's Energy Information Administration said that U.S. crude supplies fell by 600,000 barrels last week but are still 13 percent above year-ago levels. Analysts expected a drop of 2 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos.

Gasoline supplies rose by 3.8 million barrels, well above the 250,000-barrel increase that analysts forecast. Demand for gasoline at the wholesale level is nearly 3 percent lower than a year ago.

Flynn also said traders were looking beyond the fiscal cliff to supply changes in the new year. Next month the pipeline between Cushing, Oklahoma, and Texas will increase flow. That means more buyers can access that oil. Flynn expects that will drive up the price. And with much of the U.S. facing its real first cold snap of the winter, Flynn said many traders also expect more demand for petroleum products.

In other energy futures trading on the New York Mercantile Exchange:

— Wholesale gasoline was down 3 cents to $2.76 a gallon.

— Heating oil fell 3 cents to $3.02 a gallon.

— Natural gas rose 4 cents to $3.47 per 1,000 cubic feet.

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