Oil retreats from $50 after US stock build

Oil retreats from $50 after US stock build
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First Published: Wed, Mar 18 2009. 04 17 PM IST
Updated: Wed, Mar 18 2009. 04 17 PM IST
London: Oil fell from a 2-1/2-month high to below $49 a barrel on Wednesday after industry data showed large builds in US crude stocks.
Analysts said data from the American Petroleum Institute, showing crude stocks rose much more than expected last week, reflected poor demand at refineries and could foreshadow an equally poor set of numbers from the US Energy Information Administration due later on Wednesday.
US light crude for April delivery fell 35 cents to $48.81 a barrel by 0945 GMT. On Tuesday, the contract gained $1.81 to $49.16, its highest settlement since 1 December 2008.
London Brent crude slipped 36 cents to $47.88.
Oil has tumbled $100 from a record high of almost $150 in July as economic meltdown has cut demand for fuel worldwide.
But prices, which sank to levels below $35 a month ago, have since stabilized in the $40 to $50 range, as producer group Opec has targeted output cuts of 4.2 million barrels per day (bpd) since last September and vowed at its Sunday meeting to achieve higher compliance from members to reduce production.
Oil’s gains on Tuesday were boosted by better-than-expected US housing data and inflation, which drove US stocks higher and lifted investors’ risk appetite.
Broker MF Global said in its daily note to clients that while Tuesday’s US housing figures had been supportive, “it will take far more than one set of monthly figures to turn sentiment (let alone the economy) around.”
“In view of the fact that Opec has decided not to put through any additional cuts, we find it hard to rationalize a sustained push beyond this mark,” it said.
“The combination of all these variables makes the case that some length should be taken off the table here, as the energy markets have done too much, too soon given the prevailing fundamental and technical backdrops.”
The American Petroleum Institute (API) said in its inventory report on Tuesday that domestic crude stocks rose 4.7 million barrels last week to 349.9 million, dwarfing forecasts for an increase of just 1 million barrels.
The US Energy Information Administration (EIA) will issue stock data later on Wednesday.
Government data on Tuesday showed US housing starts and permits rebounded in February from record lows, rising for the first time in 10 months and offering a glimmer of hope for the recession-hit economy.
Still, analysts were cautious about whether the housing data marked a turnaround for the world economy and said the market would keep a close eye on further data to gauge how the US economy was faring.
Data due to be released later on Wednesday included US core consumer price index for February as well as results of an interest rate meeting held by the US Federal Open Market Committee.
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First Published: Wed, Mar 18 2009. 04 17 PM IST
More Topics: Markets | Oil | Crude | Proces | Opec |