Transcripts

Petroleum Inventories Increase While Oil Prices Decrease

SUSIE GHARIB: Crude oil fell more than 3 percent today to $57.65 a barrel in New York trading. Pushing down prices was news of rising fuel supplies, the seventh straight weekly increase. But as Erika Miller reports, analysts see plenty of reasons that crude could spurt higher in the weeks ahead.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here at the New York Mercantile Exchange, crude oil futures slumped almost $2 a barrel to the lowest level since late November. Today`s sell-off was sparked by weekly government data showing a big jump in domestic supplies of oil, gasoline and distillate fuels. U.S. crude oil inventories surged 4.9 million barrels last week, nearly five times what was expected. Stockpiles of gasoline and distillate fuels also rose far more than forecast. The government says the rising inventories are the result of unusually warm winter weather in much of the U.S. Even a record snowfall in the northeast over the weekend didn`t push up crude prices.

WILLIAM WALLACE, OIL TRADER: Technically, the winter, for all intents and purposes, is over in about three weeks, give or take. And to have sailed through the better part of the winter with no real demand -- literally, no real demand-- it`s a big relief for the market.

MILLER: Including today`s decline, crude futures are down 17 percent in less than four weeks. Many analysts predict prices will remain volatile in coming months.

JEB ARMSTRONG, OIL ANALYST, ARGUS RESEARCH: We`re looking for oil prices to sort of bat around a lot -- probably in the high 50s range. It may go down to the low 50s, but then all it takes is one small incident somewhere, and we`re back up to the mid-60s, toward 70s in a heartbeat.

MILLER: One factor that could push prices higher is an up tick in U.S. demand, brought on by the start of the driving season later this spring. Traders are also worried about rising tensions between the U.S. and Iran, OPEC`s second largest producer. The Bush administration is considering sanctions against that country because of its atomic energy program. If sanctions are imposed, Iran could be forced to halt oil exports and analysts fear prices might soar. Oil prices are expected to seesaw in the coming weeks, but analysts still think for the year as a whole, crude will average about $58 a barrel, right where it is now. Erika Miller, NIGHTLY BUSINESS REPORT, New York.