Crude drops despite inventories, storm, OPEC

Crude oil prices slipped Wednesday after early gains, with West Texas Intermediate crude for October delivery trading 36 cents lower to $102.90 per barrel around the close of trade on the New York Mercantile Exchange while Brent crude remained below $100 per barrel for a second session in a row.

Prices fell even though US inventories were reported lower by the US Energy Information Administration and refineries ran at only 78.3 percent of capacity, as fuel demand dropped by 3.8 percent in the past four weeks.

The EIA said in its weekly inventories report that crude oil inventories were down by 5.9 million barrels to 298 million barrels in the week ending 5 September, while gasoline stockpiles fell by 6.5 million barrels and distillates in storage dropped by 1.2 million barrels.

The drops in crude oil and gasoline stockpiles were more than expected, but distillates inventories did not fall as much as had been anticipated.

There were price gains earlier, after the Organization of Petroleum Exporting Countries announced that it will cut output by 520,000 barrels per day but will not drop quotas from present levels, a compromise seen as an attempt to halt recent price declines without causing political trouble with consumer nations.

In addition, the majority of natural gas and oil production in the Gulf of Mexico remained closed, as it has been for most of two weeks, as Hurricane Ike entered the Gulf of Mexico on its way to a likely landfall in Texas later in the week.

Near the close of floor trade in New York, Nymex October gasoline was up 1 cent to $2.67 per gallon but October heating oil was 2 cents lower to $2.90 per gallon and October natural gas had dropped 14 cents to $7.40 per million British thermal units.