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Oil falls more than $2 on growth worries, dollar

Oil falls more than $2 on growth worries, dollar
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First Published: Thu, Jun 23 2011. 02 19 PM IST
Updated: Thu, Jun 23 2011. 02 19 PM IST
London: North Sea Brent crude oil fell more than $2 per barrel on Thursday as concerns over the prospects for global economic growth and fuel demand overshadowed a surprise draw in gasoline stockpiles in the world’s top consumer, the United States.
Commodities and stock markets dropped across the board after the Federal Reserve on Wednesday cut its growth forecasts for the world’s biggest economy.
Federal Reserve Chairman Ben Bernanke offered no hint the US central bank was considering any more stimulus to accelerate growth, a move that disappointed many commodity investors and weighed on markets from gold to oil.
The dollar rose against other major currencies, putting further pressure on oil, which often moves inversely to the U.S. currency.
Brent fell $2.49 to a low of $111.72 a barrel before recovering to trade around $111.90 by 0835 GMT, after settling $3.26 a barrel higher at $114.21 on Wednesday. US oil slipped $1.60 to $93.81.
“The Federal Reserve has confirmed that the economy is slowing,” said Christophe Barret, global oil analyst for French bank Credit Agricole. “Demand for oil is slowing and oil at these levels is still very expensive.”
“All the factors are negative: quantitative easing is coming to an end, we are seeing a Q2 slowdown, Chinese data is poor, inflation is rising. Everything is pushing prices down.”
Jonathan Barratt, managing director of Commodity Broking Services, was also negative on the short-term outlook, saying the Fed comments suggested there was little prospect of much higher growth for a long time.
“Growth, in terms of employment and the economy, will remain stagnant for some time and that is not a good thing,” he said.
Weak Chinese data also sapped prices, analysts said.
China’s factory-sector growth was close to stalling in June even as price pressures eased, reflecting the impact of tightening in monetary policy and slack global demand.
The Federal Reserve estimated the US economy should grow 2.7% to 2.9% this year, down from a range of 3.1 to 3.3% forecast in April. It also cut its 2012 growth forecast to a range of 3.3% to 3.7%.
Oil rose 3% on Wednesday, boosted by data showing a drop in U.S. crude and a surprise draw in gasoline inventories.
Gasoline inventories unexpectedly dropped 464,000 barrels to 214.6 million barrels, compared with predictions of a 1 million barrel build, according to data from the US Energy Information Administration’s weekly report. Crude stocks fell 1.7 million barrels as refinery utilization increased by the most since December to hit a ten-month high.
On Thursday, markets will watch for data on jobless benefit claims due at 1230 GMT. More importantly, they will look for signs of how the broader economy is faring, with the final estimate of the nation’s first quarter real GDP due on Friday.
Analysts say oil is also likely to remain under pressure due to uncertainty surrounding Greece and the broader euro zone debt crisis, which has raised questions over the outlook for European economic growth.
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First Published: Thu, Jun 23 2011. 02 19 PM IST
More Topics: Markets | Oil | Crude | Brent | Commodity |