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Oil edges down towards $36 in thin trading

Oil edges down towards $36 in thin trading
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First Published: Mon, Jan 19 2009. 09 09 AM IST
Updated: Mon, Jan 19 2009. 09 09 AM IST
Singapore: Oil fell almost 1% towards $36 a barrel on Monday in holiday-thinned trading, erasing some of the late gains made last week on short covering, with worries about weakening oil demand again at the forefront.
A ceasefire between Israeli forces and Hamas fighting in Gaza, together with the resolution of a gas row between Russia and Ukraine weighed, easing supply fears that had helped put a floor under falling prices.
Activity was thin with the US closed for the Martin Luther King Holiday and ahead of expiry of the February Nymex contract on Tuesday, analysts said.
US light crude for February delivery, which expires on Tuesday, slid 29 cents to $36.22 a barrel by 7:20am, with only 146 lots traded, having settled up 3% on Friday at $36.51 on short-covering in pre-holiday trade.
The March contract was more actively traded with 1,226 lots changing hands and fell 37 cents at $42.20.
London Brent crude fell 47 cents at $46.10.
“The combination of drastic supply cuts with continuing global economic turmoil leading to receding consumer demand will certainly inject uncertainty, and thus volatility, into the energy markets for some time to come,” said Jonathan Kornafel, Asia Director of Hudson Capital Energy, a US-based options house.
The International Energy Agency, a leading energy watchdog, cut its estimate for 2009 demand by 940,000 barrels per day to 85.3 million bpd, a fall of about 500,000 year-on-year on Friday as the economic slowdown erodes consumption.
Acknowledging the gloomy market situation, Iran’s Oil Minister Gholamhossein Nozari was quoted as saying on Saturday that his Ministry anticipates a crude oil price of about $40 a barrel in 2009.
Falling prices could prompt Opec to consider reducing output again, Algeria’s energy and mines minister Chakib Khelil said on Saturday, adding that he expected a sharp decline in oil demand in the second quarter this year.
Israeli forces began to pull out of the Gaza Strip on Monday following a tentative truce with Hamas after the three-week war, taking some of geopolitical risk premium out of the market.
In the days after the Israeli offensive, oil prices rallied as much as 12% on fears that oil supplies from the Middle East could be affected.
Also taking out some of the supply worries that had supported prices earlier this month, Russia and Ukraine aim to sign an agreement on Monday to restart gas flows to Europe through Ukraine after finally agreeing a price for 2009 supplies.
The two former Soviet neighbours, whose pricing dispute left parts of southeast Europe without gas in the middle of winter, said on Sunday they had agreed an outline deal that would quickly restore supplies.
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First Published: Mon, Jan 19 2009. 09 09 AM IST
More Topics: Markets | Oil | Crude | Opec | Israel |