London: Crude oil fell to its lowest this year in New York on Tuesday, declining in tandem with equities, on speculation that global stockpiles remain more than adequate.
The Organization of the Petroleum Exporting Countries, or Opec, won’t need to raise oil production this year as its output of natural gas liquids increases, the International Energy Agency’s deputy executive director said on Monday.
Oil also slipped as Japan Airlines Corp., Asia’s largest carrier, filed for bankruptcy, raising concern its fuel hedges may be liquidated.
“I still see prices at current levels as overvalued by around $2 a barrel,” said Andy Sommer, an oil analyst at Eleltrizitaets-Gesellschaft in Dietikon, Switzerland. “Increasing demand in China and emerging markets is still not strong enough to offset declines in the other countries. Opec is producing too much to balance the market.”
Crude for February delivery dropped as much as 93 cents, or 1.2%, to $77.07 a barrel in electronic trading on the New York Mercantile Exchange. That’s the lowest since 24 December. It was at $77.49 as of 10.31am London time.
Futures dropped 5.7% last week, the first weekly decline in five, after US fuel supplies rose. Monday’s trades will be combined with Tuesday’s because of a holiday in the US.
February futures, which settled at $78 a barrel on 15 January, expire on Wednesday.
The more widely traded March contract fell as much as 97 cents, or 1.2%, to $77.40 a barrel.
European stock prices declined before a report that may show investor confidence in Germany, the region’s biggest economy, dropped for a fourth month in January amid signs the recovery is slowing.
Asian shares also fell, while US index futures were little changed. Japan Airlines filed for bankruptcy under a government-backed plan to help reduce debts, cut unprofitable operations and access new investment.
Brent crude for March settlement fell $1.28, or 1.7%, to $75.82 a barrel on the London-based ICE Futures Europe exchange. It traded for $76.26 as of 10.33am local time.
Ann Koh and Stella Lee in Singapore and Ben Sharples in Melbourne contributed to this story.