Singapore: Oil prices slid on Monday, eroding strong gains seen late last week after the International Energy Agency’s dramatic oil demand downgrade overshadowed data showing Chinese crude imports rose to their second-highest ever.
As trading activity slowly picks up following the Good Friday holiday, dealers will be looking for confirmation of the grim demand outlook from the US government and further evidence that the world economy may be bottoming out, aiding a return to risk assets that has buoyed stock markets.
US crude for May delivery fell 49 cents to $51.75 a barrel by 6:25am on Monday, the first day of trade since Thursday’s nearly 6% gain on the back of a rally on Wall Street, which closed out its fifth weekly gain.
“We can see some profit-taking already even though the market’s pretty quiet and volume is thin, I think we may see even more selling when London and New York open,” said Ken Hasegawa, commodity sales manager with broker Newedge in Tokyo.
The IEA said on Friday that world oil demand will dive by a hefty 2.4 million barrels per day to 83.4 million bpd this year, a one million bpd cut from its previous report.
The US Energy Information Administration will release its own short-term energy outlook on Tuesday, while Opec publishes its updated monthly view on Wednesday.
At the same time, however, preliminary Chinese trade data on Friday showed crude oil imports rose by more than a quarter versus February to the highest in a year in March and were just short of a record, as refiners replenished stocks.
And China’s industrial output growth picked up to 8.3% in March from a record low of 3.8% in the first two months of the year, Premier Wen Jiabao said, while new loans and money supply growth surged to a record high, all suggesting the economy is in better shape than expected.
Steady, but bouncing
Prices have been stuck in a $47-$54 range for the past four weeks, and with implied 30-day volatility based on options prices falling last week to near 60%, its lowest since early October, traders seem to expect stability after oil’s dramatic collapse from a $147 record high.
News that Saudi Arabia would trim oil supplies to some of its Asian customers also limited the downside, suggesting that the world’s top exporter may be more anxious than some of its Opec peers about the swollen state of global inventories.
The IEA said inventories in developed countries rose to 61.6 days of forward cover in February, far above the roughly 52 days cover that many in Opec consider comfortable.
Adding support was news that Royal Dutch Shell said on Sunday it had shut down flowstations feeding into its Trans-Niger oil pipeline in southern Nigeria as a precautionary measure after a fire at a manifold, although the scale of the outage on oil flows was not immediately apparent.