Crude Oil Falls as Stockpiles Drop Less Than Expected

LONDON – Crude oil prices eased on Thursday after data showed U.S. oil stockpiles had not been drained as much as expected in the aftermath of Hurricane Katrina (search).

U.S. light crude was off 12 cents at $64.25 a barrel on the New York Mercantile Exchange (search) after dropping more than $1 to $63.10. The market has fallen 8 percent from a record $70.85 last week, after industrialized nations began to tap emergency reserves.

Analysts say a relatively optimistic global economic outlook and still scarce gasoline supplies will limit the bearish effects of the U.S. data.

Signs that the U.S. economy may be able to weather Katrina's devastation also may encourage buying. Goldman Sachs is retaining its four percent forecast for global GDP growth for 2005 and 2006 despite many and growing risks.

Record oil prices are expected to have only a limited impact on economic growth in the European Union.

Gasoline stocks fell by 4.3 million barrels over the week, nearly two million barrels less than analysts had anticipated, the first U.S. government oil data after Hurricane Katrina showed.

Distillates were off 800,000 barrels versus expectations of a 2.6 million barrel draw. Crude stocks dropped by 6.4 million barrels, within expectations.

Refiners have until Friday to submit bids for 30 million barrels of crude oil offered from the U.S. government Strategic Petroleum Reserve (search) (SPR).

This accounts for half of a co-ordinated release of 2 million barrels per day (bpd) for 30 days in emergency stocks by the International Energy Agency (IEA), energy watchdog for 26 industrialized nations.

Only a fifth of that oil aid is sought-after gasoline, which does little to address the U.S. supply crunch, analysts say.

"We believe that this plan will not, in itself, be sufficient to return the market to pre-Katrina levels," said SG Commodities in a report.

But the Paris-based agency said it could extend the plan longer than its initial period if a U.S. gasoline supply shortage lasted longer than expected.

Some 900,000 bpd of U.S. refining capacity may still be unavailable at the end of September, while four refineries suffered major damage and may remain inoperable for months, the U.S. government's energy department said on Wednesday.

Katrina shut most of U.S. production in the Gulf of Mexico, stopped offloading of imports at the country's only port that can handle supertankers, and curtailed output at nearly two dozen refineries.

Three of eight refineries completely shut by Katrina were back in operation, while offshore oil production has recovered to 43 percent of the region's capacity.