Oil price falls back below $US100 a barrel

OIL prices fell below $US100 a barrel today as damage to refineries in Japan and shuttering of factories, following a huge earthquake and tsunami, looked likely to outweigh any boost to oil demand from reconstruction work for several months to come.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in April hit an intraday low of $US99.18 a barrel, down $US1.98 in the Globex electronic session. The contract clawed back some of those losses to trade at $US100.03 a barrel by late this morning (AEDT).
April Brent crude on London's ICE Futures exchange fell $US1.31 to an intraday low of $US112.53 a barrel.
Declines were seen across the futures curve, as traders assessed the demand destruction from damage at several Japanese refineries. Japan is the world's third-largest oil consumer after the US and China, consuming about 4.4 million barrels of crude oil a day.
A blaze at a refinery owned by Cosmo Oil near Tokyo continued today, Japanese media reported. JX Holdings said over the weekend that part of its refinery in quake-hit Sendai was on fire, although the extent of the damage isn't clear.
Nomura analyst Shigeki Matsumoto said oil refiners have scope to raise output at other plants, which have been operating at subdued levels due to near-term weakness in industrial demand and a longer-term shift by Japanese consumers toward energy-efficient technology.
But it's unlikely that this would cover the lost output from the quake-hit plants. "The range of petrochemicals they can produce depends on the type of crude oil used and the equipment they have at each facility," Mr Matsumoto said.
Jim Ritterbusch, president of oil trading advisory firm Ritterbusch & Associates, said the Japan quake appears to be net bearish for the crude market, as the drag on the Japanese economy will more than offset any rise in fuel oil imports for power generation.
Japan's Big Three auto manufacturers are suspending production at their domestic plants due to difficulties in procuring auto parts following the earthquake. Toyota Motor is the worst affected, with 12 domestic plants temporarily closed.
Extended closures of nuclear facilities are likely to follow the struggle to contain a fire and radiation leaks at Tokyo Electric Power's Fukushima complex. Ten Japanese nuclear reactors with a combined capacity of 8.6 gigawatts, or about one-fifth of the country's nuclear power, have been taken offline because of the earthquake.
Roughly a quarter of Japan's electricity comes from nuclear generation, according to the US Energy Information Administration. About two thirds is powered by conventional sources such as gas, petroleum and coal.
Barclays Capital said that Japan's oil consumption would rise by around 238,000 barrels a day if fuel oil is used exclusively to compensate for the shortfall in nuclear power output, but said the actual figure will be lower as fuel-switching will also include natural gas and coal.
"We expect that a prolonged shutdown of the Fukushima Daiichi power station will increase import demand for fuel oil, coal and liquefied natural gas, putting upward pressure on coal and gas prices," said Lachlan Shaw, an analyst at Commonwealth Bank of Australia.
The Fukushima Daiichi nuclear plant's capacity translates to up to 14 million tonnes of thermal coal equivalent, or between 1.5 per cent and 2 per cent of global trade each year. Coal accounts for a quarter of Japan's energy consumption, higher than natural gas and nuclear power.
Weekly thermal coal prices at the Australian port of Newcastle -- a benchmark for the Asia-Pacific region -- were assessed prior to the Japan quake Friday at $US129.60 a tonne, close to a two-year high of $US131.71 a tonne reached February 25.