Oil falls towards $73 on high US stocks

Oil falls towards $73 on high US stocks
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First Published: Fri, May 14 2010. 09 45 AM IST
Updated: Fri, May 14 2010. 05 40 PM IST
London: US crude oil prices fell to a three-month low near $73 a barrel on Friday, dragged down by swollen US crude inventories and concerns that the European debt crisis will curb future energy demand growth.
Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the US contract, have risen for the last eight weeks to a record 37 million barrels, pushing front-month US crude down relative to both more distant futures contracts and the alternative global crude benchmark, Brent.
US crude for June delivery fell $1.25 to $73.15 a barrel by 2:24pm, the lowest price for a front-month contract since 12 February.
ICE Brent futures also fell more than $1 on Friday and were down $1.33 at $78.78 a barrel by the same time.
The spread between front-month US crude prices and longer-dated futures, known as the contango, is now near 15-month highs. The US benchmark West Texas Intermediate (WTI) is also near the deepest discount to Brent crude since February 2009.
“The spectre of large crude oil inventories seems to be weighing on markets much more than before, and has been instrumental in pressuring prices, widening the contangos and contributing to Brent’s expanding premium over WTI,” said Edward Meir of MF Global.
Concerns that rigorous fiscal tightening in Europe following the Greek debt crisis could imperil the still tentative economic recovery also weighed on prices, analysts said.
The euro hit a 14-month low against the dollar on Friday, dampening European buying interest for dollar-denominated commodities such as oil.
“The European debt crisis has made us question the growth outlook for the global economy and therefore fuel demand,” said Toby Hassall, an analyst at CWA Global Markets in Sydney.
Earlier this week, the International Energy Agency trimmed its 2010 global oil demand forecast by 50,000 barrels per day (bpd) to 1.62 million bpd.
It said the Greek debt crisis could dent oil consumption if it spreads to other countries such as Spain, Portugal and Italy.
But this contrasted with the Organisation of Petroleum Exporting Countries and US government unit Energy Information Administration which both raised their estimates for world oil demand growth in 2010.
Earlier this week, oil rose sharply following the announcement of a rescue package of almost $1 trillion, led by the European Union and the International Monetary Fund for debt-laden European economies.
At one point in Monday’s session oil was up more than $3 since the previous close at a high of $78.51 a barrel but the market has since reversed, falling in the three subsequent sessions and now on track to fall for a fourth.
The market will later look to US economic indicators set to be published on Friday, including industrial production and retail sales for April in the world’s top energy consumer.
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First Published: Fri, May 14 2010. 09 45 AM IST
More Topics: Markets | Oil | Commodity | Crude Prices | Gasoline |