Peth: Oil fell below $47 a barrel on Tuesday, giving up some of previous session’s gains, as economic concerns returned to the fore amid reports showing the US economy was deteriorating further.
Poor economic data from the United States, where industrial output in February plummeted to its lowest level in almost seven years, served as a stark reminder that the 14-month long recession in the world’s largest economy was far from over, analysts said.
US light crude for April delivery fell 66 cents to $46.69 a barrel by 1:39pm. The contract settled at $1.10 higher at $47.35 on Monday. London Brent crude fell $1.03 cents to $45.43.
“The market is now reacting to economic data and there may be concerns that the credit card defaults may worsen the financial situation,” said John Vautrain, an analyst at Purvin & Gertz in Singapore.
US credit card defaults rose in February to their highest level in at least 20 years, undermining hopes of bank stability.
Oil has tumbled $100 from a record high above $147 last July as the global economic meltdown has dented demand for oil worldwide.
The Organization of the Petroleum Exporting Countries (Opec) met on Sunday and decided not to cut output further, but rather concentrate on existing cuts that total 4.2 million barrels per day since September.
The cartel’s compliance with current cuts is estimated at about 80% and full adherence would take a further 800,000 barrels per day off the market.
“Opec has really restored some its credibility and there is optimism that it will be able to reach the target. If they do, prices could trend upwards to around $50 a barrel,” said Clarence Chu, a trader at US-based Hudson Capital Energy in Singapore.
With Opec uncertainties behind it, analysts said the market will look to economic indicators and the performance of equities markets for guidance.
Economic indicators due later on Tuesday include US February Producer Price Index and weekly US retail sales. The Federal Open Market Committee will also hold the first of a two-day meeting on interest rates.
In addition, traders will also be watching out for this week’s inventory data as a gauge of energy demand in the United States, with data from industry group American Petroleum Institute (API) due later today giving near-term direction.
A preliminary Reuters poll ahead of US weekly inventory reports showed analysts forecasts for a 500,000 barrel increase in domestic crude stocks last week.