US oil prices fell sharply on Monday and helped pull Brent crude prices below $100 a barrel as Egypt's simmering unrest had not disrupted any of the region's supply and as stockpiles in the United States bulged. Rising US crude oil inventories and Friday's disappointing US payrolls data tempering optimism about the economic recovery were seen weighing on US oil prices.
Refinery problems and a forecast for US heating oil demand this week to be above normal lent early support to US gasoline and heating oil futures. US crude oil for March delivery fell $1.33 to $87.70 a barrel at 12:51 pm EST (1751 GMT). In London, ICE Brent crude for March fell 99 cents to $98.84 a barrel, off its $100.90 intraday peak. The US crude price weakness helped keep Brent crude's price premium above $11 a barrel. President Hosni Mubarak's new cabinet held its first full meeting since an uprising started nearly two weeks ago, with little progress in talks with an opposition demanding his immediate exit.
Mubarak has refused calls to end his 30-year presidency before the September election. Protesters have vowed to stay in the streets until Mubarak quits. Oil traders and investors worry that unrest in Tunisia and Egypt could fuel similar protests in oil producing countries.
"Oil prices fell as Egypt did not continue to descend into chaos and the employment number was a disappointing jumbled mess," Phil Flynn, an analyst at PFGBest Research in Chicago, said in a note. Friday's US jobs report showed nonfarm payrolls grew by only 36,000 in January, well below forecasts. Yet, the unemployment rate fell.
"Certainly, the disappointing jobs number last Friday adds to the scepticism that seems to have been growing before the Egyptian crisis broke," wrote Michael Fitzpatrick, editor at Energy Overview, an industry newsletter in New York. Domestic US crude stocks rose 2.59 million barrels in the week to January 28, according to the most recent report from the US Energy Information Administration.
Inventories have risen to record levels at Cushing, Oklahoma, the delivery point for West Texas Intermediate, the New York Mercantile Exchange's light sweet crude benchmark. The euro fell against the dollar on disappointing German data, also helping curb oil prices, brokers said. A stronger dollar can pressure dollar-denominated oil because consumers using other currencies must pay producers more, curbing demand, while the greenbacks paid to producers rise in value. But copper prices ignored the dollar's strength and hit a record as concerns about supply, especially from top producer Chile, added to a recent stream of positive economic data that boosted the outlook for industrial metals demand.
US gasoline and heating oil futures were supported by reports of refinery problems and a forecast for another week of above-normal heating demand. Valero Energy Corp shut its 235,000-barrel-per-day Aruba refinery after a water tank collapsed, but the disruption was not expected to be lengthy, the company said.
Motiva Enterprises' 285,000-barrel-per-day refinery in Port Arthur, Texas, was operational, the company said, despite a regulatory notice filed earlier saying units were shut. US heating oil demand this week was expected to average 7.5 percent above normal, the National Weather Service said.
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