While oil has fallen in the fourth quarter during 13 of the past 20 years because of the transition from peak summer demand, the pressure for another drop in the months ahead is the most intense since 2004 and may defer any rebound to record crude prices until the first half of 2008.
Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc anticipate oil will slide from last month's record $83.90 a barrel as gasoline sales weaken to the lowest level this year and a slowing U.S. economy curbs demand. Profits from making fuels are so low that refiners have 12.5 percent of capacity off line, the second-highest rate of the past two decades for this time of year, data from the U.S. Department of Energy show.
``Refinery profit margins are being squeezed at a time when significant maintenance is scheduled,'' said Tim Evans, an energy analyst with Citigroup Global Markets Inc. in New York. ``The combination of these factors should send crude oil lower.''
Oil traders and analysts have never been more pessimistic, with 75 percent of respondents anticipating prices will fall, according to a weekly survey by Bloomberg News that started in April 2004.
Crude may end the year below $70 a barrel, compared with $81.66 at the end of the third quarter, forecasts Adam Sieminski, the global oil analyst at Deutsche Bank in New York. If he's right, a $1 million investment in crude oil futures in New York would more than double to $2.3 million, assuming speculators used the exchange's minimum deposit to conduct the transaction.
Lower Fuel Demand
``The most important development of the last six weeks has been that there's been no growth in demand for petroleum products,'' Sieminski said. ``High gasoline prices weren't enough to curb demand. The combination of the threat of layoffs and higher mortgages might finally be doing the job.''
Not everyone forecasts that oil will move lower by the end of the year. Goldman Sachs Group Inc. is the most bullish commodities trading firm on oil, forecasting on Sept. 17 that crude will end the year at $85 a barrel, with a ``high risk'' of a jump above $90, according to a report from analysts including Jeffrey Currie in London. Its two current trading recommendations on oil are both money-losers. One of them was to buy the gasoline refining margin, which has lost more than half its value since then, Goldman's research shows.
U.S. fuel consumption during the four weeks ending Sept. 28 averaged 20.45 million barrels a day, down 0.3 percent from the same period a year earlier, according to the Energy Department.
``We've seen with gasoline that month-on-month demand is lower for the first time in the U.S. in years,'' said Hakan Kocayusufpasaoglu, director of commodity derivatives at Credit Suisse in London.
Gasoline futures on the New York Mercantile Exchange declined 7.1 percent to $2.034 a gallon in the last five months, while crude oil has increased 31 percent to $80.41 a barrel during the same period.
``We're at a turning point for prices and margins,'' said Lynn Westfall, San Antonio-based chief economist for Tesoro Corp., the second-biggest refiner in California. ``It's hard to imagine $80 oil being sustainable based on supply.''
The profit from turning three barrels of crude oil into two barrels of gasoline and one of heating oil fell to $5.7406 on Oct. 2, the lowest in 11 months. It surged to $30.479 on May 17, the highest since at least 1989, based on futures prices in New York.
U.S. oil refineries are running at 87.5 percent of capacity, according to the U.S. Energy Department. The only time rates were lower for this time of year was in 2005, when Hurricanes Katrina and Rita slammed the Gulf Coast. Crude-oil demand is falling this month because refiners have scheduled maintenance during a lull in fuel sales.
``You're looking at a situation where refiner...