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Oil falls towards $77 on mixed US economy

Oil falls towards $77 on mixed US economy
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First Published: Thu, Jun 17 2010. 12 56 PM IST
Updated: Thu, Jun 17 2010. 12 56 PM IST
Singapore: Oil retreated by 0.8% towards $77 on Thursday, slipping from its highest since early May, as the pace of demand growth was questioned following mixed economic and inventory data from top consumer the United States.
US industrial production rose faster than forecast in May, while housing starts fell more than expected. And the nation’s demand for distillate fuel including heating oil and diesel jumped over the past four weeks, while crude inventories posted a surprise increase last week.
Renewed concerns about Spain’s credit and banking system toppled the euro from a two-week high against the dollar on Wednesday. The greenback extended gains on Thursday, up about 0.3% against a basket of currencies.
European Union leaders hope to agree on ways to strengthen budget discipline and economic policy coordination on Thursday to show financial markets they can manage the euro zone debt crisis.
US crude for July fell 65 cents to $77.02 a barrel at 12:32pm, having touched $78.13 on Wednesday, the highest intraday price since 10 May. ICE Brent for August slid 28 cents to $77.86.
“The poorer than expected housing data and the unexpected gains in crude inventories are weighing on prices,” said Serene Lim, a Singapore-based oil analyst at ANZ.
“Investors will be quite jittery about the euro, and the strength of the dollar will cap gains in oil,” Lim said.
A stronger dollar makes imports more expensive for holders of other currencies.
Prices also fell after Norwegian offshore oil workers landed a wage deal with energy companies on Thursday, averting a strike that had threatened production in three oil and gas fields in the North Sea.
Oil has recovered by about 19% from this year’s low below $65 on 20 May. Some analysts say the rebound responds to a clearer perception that the effect of Europe’s debt crisis on energy demand will be limited.
“The true likely importance of European debt concerns has perhaps now been better quantified, and the focus seems to have shifted to threats that might moderate growth in specific regions, rather than fears that the entire global economic recovery will be derailed,” Barclays Capital said in a weekly report.
“With economic fears abounding, the second quarter has proved something of a lost quarter for oil prices,” the bank said.
Overall oil product demand in the US advanced by 1.9% in the past four weeks from a year earlier, the Energy Information Administration said in a weekly report on Wednesday.
Distillate use jumped almost 14% in the same period.
But the nation’s crude stockpiles rose unexpectedly last week by 1.7 million barrels on the back of higher imports and lower refinery utilisation, the EIA said.
Crude oil stocks at the Cushing, Oklahoma pricing point for US crude futures rose by 200,000 barrels to 37.6 million barrels, EIA said.
The persistence of abundant supplies at the hub is depressing the price of front-month West Texas Intermediate crude relative to European benchmark Brent, which was trading about 85 cents higher on Thursday, compared with less than a 50-cent premium for Wednesday’s settlement.
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First Published: Thu, Jun 17 2010. 12 56 PM IST
More Topics: Commodities | Energy | Asia | Oil | Crude Prices |