Crude Oil Drops as Loss of Demand in Japan Outweighs Middle East Tension
Tuesday March 15 2011 | 05:18 AM

Oil fell in New York as concern damage from Japan’s earthquake will limit crude demand outweighed speculation that escalating tension in the Middle East will disrupt supplies.

Prices slid as much as 2.5 percent as factories and power plants remained shut in Japan following the March 11 temblor, the largest recorded in the country. About 29 percent of the refinery capacity in the nation, the world’s third-largest crude user, was closed after the disaster.

“For the time being the refinery demand remains off, so that will impact the oil price,” said Tetsu Emori, a commodity fund manager with Astmax Ltd. in Tokyo. “It might take half a year to sort out the damage.”

Crude oil for April delivery dropped as much as $2.52 to $98.67 a barrel in electronic trading on the New York Mercantile Exchange, and was at $99.70 at 4:46 p.m. Singapore time. Yesterday, the contract advanced 3 cents to $101.19.

Brent oil for April settlement fell as much as 2.2 percent to $111.19 a barrel and was trading at $112.39 a barrel on the London-based ICE Futures Europe exchange. The contract slid 17 cents, or 0.2 percent, to $113.67 yesterday.

Oil rose as much as 0.7 percent earlier today in New York after Saudi Arabia’s cabinet said the kingdom has responded to a Bahraini request for “support” amid civil unrest.

Regional turmoil has toppled the leaders of Tunisia and Egypt and reached Yemen, Oman and Iran. Violence in Libya, which cut two-thirds of the nations crude production, continued as forces loyal to leader Muammar Qaddafi carried out air strikes against rebels in the town of Ajdabiya.

Saudi Soldiers

“The Saudis will not accept any sort of disruption in the nearby countries,” said Emori. “They have to stop this from happening so that’s why they are sending soldiers.”

Futures have surged 9 percent in New York since Jan. 14, when the president of Tunisia was ousted. Prices climbed to a 29-month high of $106.95 a barrel in intraday trading March 7.

Gasoline fell as much as 4.1 percent to $2.8393 a gallon in New York, the biggest intraday drop since Oct. 19, 2010. Prices are down 3 percent this week.

JX-Nippon Oil & Energy Corp. closed refineries in Sendai and Kashima in Japan’s northeastern Tohoku region. A fire at the Sendai plant was extinguished at about 2:30 p.m. local time today. The Negishi plant near Tokyo is also shuttered.

Cosmo Oil Co. shut its 220,000-barrel a day Chiba facility following fires at liquefied petroleum gas storage tanks. Kyokuto Petroleum Industries Ltd. has shuttered its 175,000- barrel a day facility in Ichihara, near the capital.

TonenGeneral Sekiyu K.K. said yesterday that it is restarting units at its 335,000-barrel a day Kawasaki plant.

Refineries Closed

The closures have affected about 1.3 million barrels of the country’s 4.52 million barrels a day of capacity, based on data from the Petroleum Association of Japan.

Japan consumed 4.42 million barrels a day of oil in 2010, according to data from the International Energy Agency’s Feb. 10 monthly Oil Market Report. China used 9.39 million barrels and the U.S. consumed 19.25 million, the agency said.

Sony Corp., the country’s biggest export of consumer electronics, stopped operations at 10 factories because of power outages and damages. Toyota Motor Corp., the world’s largest automaker, has closed all of its plants.

Stockpiles of crude oil in the U.S. probably rose 1.75 million barrels from 348.9 million in the seven days ended March 11, according to the median of estimates before an Energy Department report tomorrow.

Gasoline inventories dropped 2 million barrels from 229.2 million a week earlier, according to the survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, slipped 1.5 million barrels from 155.2 million the previous week.

The Energy Department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington. The industry-funded American Petroleum Institute will report its own data today.