LONDON, 13 May 2005 — World oil prices fell heavily below $49 a barrel yesterday in response to data showing high levels of US crude inventories amid easing demand in energy-hungry China and the United States. New York’s main contract, light sweet crude for delivery in June, slid 1.85 dollars to $48.60 per barrel in early deals, having earlier hit $48.50, its lowest level since Feb. 18.
In London, the price of Brent North Sea crude oil for delivery in June slumped 1.37 cents to $48.70 per barrel, after reaching $48.58 - a low point last seen on Feb. 24.
New York futures had slumped by 1.62 dollars on Wednesday to close at $50.45 per barrel after the latest weekly snapshot from the US Department of Energy (DoE) showed increasing levels of US crude stockpiles.
“It’s simple, the reason why prices are going down is just that the US inventories are getting actually quite high now,” Seymour Pierce analyst Richard Slape said.
“They haven’t been that high since July 1999 so even allowing for the fact that demand has risen a lot since then, that it is still a fairly comfortable position to be in. “Similarly gasoline inventories are also at their highest level for several years for this time of the year,” Slape added.
Meanwhile, the White House wants to see oil prices fall by about half to around $25 a barrel although reaching that goal may take time, President George W. Bush’s top economic adviser said on Wednesday.
“We would like to see the price get back to around $25 a barrel, somewhere around there,” Allan Hubbard, director of the White House National Economic Council, said in an interview with Reuters.
Hubbard acknowledged: “It’s going to take a while for the world energy supply to expand so prices can drop.” The administration has shied away in the past from giving a preferred target for oil prices.
n administration official said later that Hubbard was speaking “theoretically about a goal, but the White House is well aware that markets set the price for oil.”
With oil prices soaring, energy policy has vaulted to the top of Bush’s economic agenda but Hubbard said Bush is not backing off his goal of passing Social Security legislation this year despite opposition.
He suggested, however, that Bush would continue the fight if the legislation hits a snag. “He’s totally patient,” Hubbard said. “He’s not going to give up.”
Hubbard was noncommittal on proposals by House Ways and Means Committee Chairman Bill Thomas, who favors a package that would include incentives to boost retirement savings. While praising Thomas, Hubbard said that in his talks with California Republican “we have not gotten into those details.” But he cautioned that there were fiscal constraints. “We’re always worried about costs.”
Some of Bush’s fellow Republicans, including Sen. Trent Lott of Mississippi, have publicly distanced themselves from his proposal to reduce promised Social Security retirement benefits to all but low-income workers.
Hubbard disputed that Capitol Hill Republicans were cool to the plan. “My contact up there is exactly the opposite.” Hubbard said Bush would discuss proposals for add-on retirement accounts, but preferred the carved-out approach.
The so-called add-on accounts would not divert Social Security taxes away from the program, while Bush’s proposal would direct a portion of those taxes into private accounts. He said low-income workers are spending all their disposable income on basics like food, housing and transportation and “there’s really no extra money to put into an add-on account.”
Bush campaigned in 2000 with a promise to “jawbone” OPEC countries and Hubbard said Bush has been pressing Saudi Arabia “and I’m sure others” to try to get prices down.
