Singapore: Oil edged down towards $42 a barrel on Thursday, as fears over faltering demand in the global economy outweighed US data showing lower gasoline and distillate stocks in the world’s top energy consumer.
Traders will watch for US weekly jobless claims and December durable goods orders later on Thursday, as well as advance fourth-quarter gross domestic product data on Friday, for further clues on the health of the US economy.
US crude eased 11 cents a barrel to $42.05 by 8am, while London Brent crude fell 15 cents to $44.75.
Crude prices plunged 9% earlier this week on fresh signs that the largest oil consumer the United States was still deeply mired in recession.
“The market is probably going to drift lower in the days ahead - we will probably test the lows of between $35 and $39, but it should not go much lower than that - the bottom is being put in,” said Mark Waggoner, president of Excel Futures in California.
Oil prices rebounded on Wednesday after data released by the US Energy Information Administration showed a 1 million barrel draw in distillate stocks last week as cold weather hit the US Northeast, the world’s top heating oil market, and a surprise 100,000 barrel fall in gasoline supplies.
Crude also got a boost from remarks by Opec secretary general Abdullah al-Badri at the World Economic Forum in Davos, Switzerland, that an oil price of $50 a barrel was too low to encourage investment in new supply and the cartel would fully enforce supply curbs by the end of this month.
But jitters over the data release later in the day, likely to give a grim reading of the US economy, weighed on market sentiment and sparked an early bout of selling.
Furthermore, the US weekly jobless count is expected to show that 580,000 people filed new claims for state unemployment insurance in the week ended Saturday, following a week with 589,000 new claims.
All eyes will be trained on the government’s first snapshot of the US economy in the fourth quarter, due on Friday, which will show it at its weakest in 26 years, hit by plunging consumer spending and surging unemployment rates.
The dismal forecast comes atop the Internation Monetary Fund’s forecast on Wednesday that world economic growth this year will fall to its most sluggish since World War Two.
On the supply front, price support for oil is likely to come from expanding US refinery run cuts, analysts said.
Opec’s supply cuts since the second half of 2008, in reaction to the fall of more than $100 in oil prices since July as global economic weakness slams energy demand, have also offered a boost.
Kuwait said on Tuesday it would support a further production cut if needed, echoing comments by some other Opec members, while smallest member Ecuador said it would comply with the production cuts agreed by the cartel.