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Oil falls towards $71 on US stockbuild

Oil falls towards $71 on US stockbuild
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First Published: Thu, Aug 27 2009. 09 05 AM IST
Updated: Thu, Aug 27 2009. 09 05 AM IST
Singapore: Oil fell towards $71 on Thursday, extending losses by more than $3 after touching a 10-month high this week, as rising crude and diesel stocks eclipsed healthy economic data from the United States and Europe.
Investors are also edgy about the pace of economic recovery in China, a likely clampdown on lending and plans to curtail overcapacity, prompting falls in equities markets in Shanghai, Hong Kong and Japan.
US crude for October fell 15 cents to $71.28 a barrel by 08:04am, retreating further from $75 hit earlier this week, the higest level since October. Brent crude fell 20 cents to $71.45 a barrel.
“The question is whether both the commodities and equities markets have priced in the turnaround in the US housing markets and other data,” said Ben Westmore, commodities analyst with National Australia Bank.
He was referring to better-than-expected gains in US housing prices, an increase in durable goods orders and consumer confidence this week, lending new credence to the view that the economy is emerging from recession.
“I don’t think the markets will move much more on that.”
Eyes will now be on the US GDP and jobless claims data later on Thursday, as well as German consumer sentiment.
Stirring concerns over the growth of the world’s No. 2 energy consumer, the Chinese cabinet said on Wednesday it would take steps to curb redundant investment and overcapacity in industries ranging from steel to wind power equipment.
The decision came amid fears that China’s $585 billion stimulus plan and a surge in new lending in the first half could trigger wasteful investment and a new crop of bad loans. It followed Premier Wen Jiabao’s remarks that the economy faces new difficulties, including trouble boosting domestic consumption.
Westmore said the oil markets were still weighed down by overcapacity, as shown by recent crude and products inventory data in the world’s largest consumer.
US crude inventories rose by 200,000 barrels last week due to a rebound in imports weaker demand from refiners, Energy Information Administration (EIA) data showed, versus analyst expectations for a 1.1 million-barrel decline.
Stocks of middle distillates, which include diesel and heating oil, rose by 800,000 barrels to total 162.4 million barrels last week, up over 30 million barrels against last year, and topping projections of a 300,000-barrel build.
Gasoline stocks fell by a larger-than-expected 1.7 million barrels, against an expected 1 million-barrel fall.
About 72 million barrels of gas oil for heating and jet fuel are also being stored in tankers globally, up from around 62 million barrels in June, at a time of uncertain demand from markets in the West going into the peak winter period.
On current fundamentals, traders do not see prices breaking $75, the level at which they have been taking profits after oil jumped almost 130% from the lows at the turn of the year.
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First Published: Thu, Aug 27 2009. 09 05 AM IST
More Topics: Markets | Oil | Commodities | Energy | Gasoline |