London: A bigger than expected rise in US gasoline stocks and a fresh focus on global financial weakness pushed oil markets down a dollar on Thursday to around $68 a barrel.
For the next clue on the economic health of the world’s top energy consumer, traders were looking to US non-farm payroll data for release on Thursday, expected to show unemployment at a 26-year high of 9.6%.
US crude fell $1.08 to $68.23 a barrel by 3:26pm. The contract settled 58 cents lower at $69.31 on Wednesday.
London Brent crude dropped by 92 cents to $67.87.
“There’s a sense we’re breaking to the down-side because of weak economic data ... unemployment, house prices, lower stock markets,” said Christopher Bellew of Bache Commodities.
In addition he cited Wednesday’s US government inventory data that showed gasoline stockpiles in the United States rose by 2.3 million barrels last week.
Distillates, including diesel, also rose by 2.9 million barrels, although crude stocks dropped by 3.7 million barrels.
Traders viewed the increase in motor fuel ahead of the US 4 July Independence Day holiday - which traditionally marks the peak of the US summer driving season - as a symptom of continued demand weakness.
Some analysts are still bullish, however, and say the Organization of the Petroleum Exporting Countries (Opec) has been very successful in stabilising the market.
Oil has rallied from a low of $32.40 in December last year to highs above $70 a barrel in June, although it is only around half last July’s record of more than $147.
Over the second quarter of this year it gained around 40 % - the strongest quarterly gain since 1990.
Opec support
“Everybody has been surprised at the effectiveness of the Opec cuts,” said Angus McPhail of British-based investment firm Alliance Trust.
“We’re in a normalised range somewhere between $60 and $80 in the current environment, excluding the Iranians kicking off... Nigeria etc... I think that’s what we’re looking at and it’s what OPEC’s looking at too.”
Political unrest in oil producer Iran has had little impact on prices because the oil market is well-supplied and there is no expectation of Iran cutting off supplies.
Militant unrest in Opec member Nigeria has had a bigger impact. It has forced the shut-in of an estimated 600,000 to 700,000 barrels per day (bpd).
The involuntary output reduction has improved Opec’s compliance with production curbs, although discipline has retreated from a peak of around 80% earlier this year.
Reuters’ latest Opec survey assessed compliance at around 72% of promised cutbacks totalling 4.2 million bpd since September.
As output creeps higher, one of Opec’s smallest crude exporters Qatar told at least two Asian term buyers it will supply its Marine crude at full contracted volumes for August, compared with 14 percent supply curbs for July, sources at the firms said on Thursday.
While the West has taken the brunt of economic downturn, analysts have been looking to Asia to keep generating fuel demand.
But the governments of China and India this week both unexpectedly raised gasoline and diesel prices by as much as 10 percent, potentially capping demand growth.