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A lower 2005 demand-growth outlook from the Organization of Petroleum Exporting Countries (OPEC) and Hurricane Emily’s diminishing threat to U.S. oil and natural-gas output forced crude-oil futures to close at a more than two-week low Monday (July 18), according to CBS MarketWatch.
“The OPEC forecast confirms that of others … that have been revising demand downward,” said James Williams, an economist at WTRG Economics.
“This, combined with Emily missing the Campeche Sound production area, should be bearish for crude,” he said.
The news pulled crude for August delivery down to a close of $57.32 a barrel on the New York Mercantile Exchange – down 77 cents for the session and its lowest ending level since June 30.
August unleaded gasoline also lost ground, falling 4.1 cents to close at $1.6473 a gallon, and August heating oil declined 3.05 cents to end at $1.6316 a gallon.
In a monthly report issued earlier Monday, OPEC reduced its 2005 world oil demand estimate by 150,000 barrels a day. It blamed a “slowdown in economic activity in some regions and preliminary demand figures pointing to significantly lower consumption in the first half of the year in some major consuming countries, including China.”
“There is increasing evidence that high prices are having an impact on consumption,” said Williams. “Most of the impact of high prices on consumption take over a year to materialize,” he said.
On the other hand, in a possible preview of his testimony to Congress later this week, Fed Chief Alan Greenspan said “the U.S. economy seems to be coping pretty well with the run-up in crude-oil prices.” His comments came in a series of written answers to questions released by the Joint Economic Committee of Congress on Monday.
Overall, traders appeared convinced that Hurricane Emily will have little impact on oil and natural-gas production and shipments in the Gulf of Mexico.
But the storm did force the evacuation of 42 oil and natural-gas rigs and platforms in the Gulf of Mexico as of Monday, according to the latest report from the U.S. Minerals Management Service.