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Oil falls towards $57 on fresh demand concerns

Oil falls towards $57 on fresh demand concerns
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First Published: Thu, May 14 2009. 12 11 PM IST
Singapore: Oil prices fell to $57 a barrel on Thursday, after a 1% plus decline the previous day, as equity markets slipped, weighing on optimism for economic recovery and energy demand.
Oil slid on Wednesday after disappointing US retail sales data prompted a more than 2% drop on Wall Street.
Analysts said oil and equity markets would look towards the US government’s weekly readings on jobless claims later in the day for further clues on the economy.
US crude fell 54 cents to $57.48 a barrel, and London Brent fell 33 cents to $57.01.
“There’s a bit of economic data coming out of the U.S. that could add some surprise upside. We have jobless claims coming in, so in the next 24 hours that’s one thing to look at,” Ben Westmore, commodity analyst at National Australia Bank, said.
The US government will release data on weekly jobless claims and April producer prices today, followed by the consumer price index on Friday.
Oil prices have been tracking equities markets closely in recent months as traders look to stocks for signs of an economic recovery that could lift ailing world fuel demand. A rally in stocks markets this year has helped lift crude prices almost 80% from a January low of $32.70.
Tokyo’s Nikkei average hit a two-week closing low on Thursday with a 2.64% loss.
The dollar held near a one-week high versus the euro on Thursday, adding pressure on oil prices. A firmer dollar makes oil more expensive to holders of other currencies.
Reflecting still-tenuous economic recovery, US April retail sales data registered a second straight month of declines after back-to-back gains in January and February, defying investors’ hopes that more “green shoots” had taken root.
Hopes for a quick rebound in the global economy also receded following a report of slumping European industrial output and a Bank of England forecast saying Britain needed a long period of healing.
“We’re at a point in the economic cycle where the oil market is taking its cue from equity markets. It’s not quite focused on fundamentals of the market,” Westmore said.
Crude fell even as Nigeria’s main militant group threatened to attack oil companies in the Niger Delta following heavy clashes with security forces. It extended the deadline for the companies to evacuate staff by another 48 hours.
Oil’s retreat from a six-month high on Tuesday also came despite the US Energy Information Administration’s report showing US crude stocks fell 4.7 million barrels, confounding expectations for a 10th straight weekly build.
Ailing demand for fuel has taken oil prices more than 60% off the record above $147 a barrel hit in July.
Opec said on Wednesday that world oil demand is still shrinking as the global economy contracts, and oil’s rise reflected sentiment rather than fundamentals, which were far from balanced.
The International Energy Agency, an energy adviser to 28 developed countries, said last month it expected total demand to fall by 2.4 million barrels per day (bpd) this year, a big cut from the 1.25 million bpd forecast in its previous monthly report. The next report is due out later in the day.
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First Published: Thu, May 14 2009. 12 11 PM IST
More Topics: Markets | Oil | Crude | Prices | Stocks |