Singapore: Oil fell on Friday to one-month lows below $76 a barrel after refiners in top consumer the United States processed the least crude in decades, reacting to a fuel demand slump, while talk of bank trading curbs upset speculators.
Proposals by US President Barack Obama to cut proprietary trading at large banks sent Asian stock markets and commodities tumbling. Japan’s benchmark index lost almost 3%, and the dollar slipped to its lowest in five weeks against the yen.
US refinery utilization, the proportion of total capacity at which refiners operate, fell 2.9 percentage points to 78.4% last week, a government report showed on Thursday. That was the lowest since the 1980s, barring occasional periods of hurricane-related disruptions, Department of Energy data showed.
“For the refinery run rates, it’s a bit on the surprise side,” said Serene Lim, a Singapore-based oil analyst at ANZ. “At this time of year they shouldn’t be dropping that much. With low demand, refiners don’t find an incentive to produce more.”
March-settlement US crude touched $75.62 a barrel, the lowest intraday price since 23 December, and was trading down 26 cents at $75.82 by 11:00am. Prices have dropped more than $8 from a 15-month low of almost $84 on 11 January. London Brent crude for March declined 18 cents to $74.40.
US regulator Commodities and Futures Trading Commission (CFTC) on 14 January announced proposals to put a cap on the size of positions dealers can hold, aiming to limit speculation. Most traders considered the proposals to be not as strict as feared.
“With last week’s CFTC proposals, I thought this would be over, but then Obama came out yesterday to increase controls,” Lim said. “Speculators have been very concerned about it.”
Prices were also under pressure from concerns that China would take further measures to temper its booming economy, Lim said, after China on Thursday reported fourth quarter growth of 10.7%, its first double-digit figure since 2008.
“Any efforts by the Chinese government to slow the economy would affect demand for raw materials,” Lim said.
China’s apparent demand for oil products will grow by about 4% this year, the National Energy Administration (NEA) said on Friday, a slower pace than the 6.3% growth for 2009, according to Reuters calculations based on official figures.
NEA also estimated that an annual total of 20 million tonnes of refining capacity, or 400,000 barrels per day (bpd), will be added this year, adding to a supply surplus of the main refined oil products.
South Korea, the world’s fifth-largest crude buyer, imported 5.9% less crude in December from a year earlier, state-run Korea National Oil Corp said on Friday.
US gasoline inventories rose a larger-than expected 3.9 million barrels the week ended 15 January, despite the reduced operating rates at refineries. Total demand for oil products over the past four weeks slid by 1.8% from a year earlier.
Demand for distillates, a fuel category that includes heating oil and diesel, plunged 6.8% from a year earlier following the return of warmer weather to the US Northeast last week.
Temperatures in the region were forecast to stay above normal through Tuesday next week, according to Telvent DTN. And analysts said even another cold snap following unseasonably cold conditions in late December and early January would have a limited and temporary effect on prices.
“While a return to cold conditions in the US next week should be enough to trigger a brief rebound to $80, we must remember that the clock is ticking on the weather trade and that demand typically falls by 1-2 million barrels per day in the second quarter,” JP Morgan said in an e-mailed note.