Singapore: Oil edged down towards $41 on Wednesday, after surging nearly 4% overnight in anticipation that producer group Opec would cut supply further at its next meeting.
Weekly inventory figures from the US Energy Information Administration (EIA) due later today will provide clues on the demand outlook for the world’s top energy consumer, while a batch of economic reports this week, topped by February unemployment data on Friday, will shed light on the state of the economy.
US crude was down 19 cents at $41.21 a barrel by 8:10am, after rising $1.50 overnight, while London Brent crude fell 34 cents to $43.36 a barrel.
“The market still lacks direction at the moment. Investors do not know what to focus on, given falling stock markets and the really bad economic outlook,” said Ken Haseagawa, manager of commodity derivatives sales at Tokyo-based broker NewEdge.
US stocks fell in volatile trading on Tuesday, with the S&P ending below 700 for the first time since October 1996, as persistent uncertainty about the amount of money needed to shore up the financial system overshadowed a hunt for bargains.
Global energy demand has collapsed as the deepening financial crisis threw major economies into a recession, causing oil prices to tumble nearly $110 since the peak last July, and Opec to agree to a series of deep production cuts. Further reductions are expected when the group next meets on 15 March.
Compliance with previous cuts has been strong, with Opec oil supply down in February for the sixth-straight month, although output remained above target levels, a Reuters survey showed.
Libya’s top Opec official, Shokri Ghanem, said markets were still oversupplied, and the exporter group needed to reduce output, either through better compliance with existing supply curbs or a new cutback.
But Opec President Jose Botelho de Vasconcelos said the cartel had yet to decide whether to cut output further when it meets.
US crude oil stockpiles dipped 463,000 barrels last week amid lower import levels and higher demand from refiners, the industry group American Petroleum Institute said on Tuesday.
The EIA will release its inventory report for last week later on Wednesday, and crude oil supplies are forecast to have risen 1.2 million barrels, according to a Reuters poll.
Oil traders consider the API report to be less accurate than the EIA data, which requires energy firms to respond to their weekly survey.
The market will also eye the release of key US economic data, including the ADP employment report for February at 6:45pm, and February non-farm payrolls data on Friday. Both sets of figures are expected to reflect rising unemployment in the economy.