Singapore: Oil slid on Tuesday as forecasts for growing US crude inventories tempered bullish sentiment about the global economic recovery, which had driven prices to an eight-week high above $82 a day earlier.
US crude for April fell 29 cents to $81.58 a barrel by 12:52pm, after touching $82.41 on Monday, the highest level since prices jumped to a 15-month high of $83.95 on 11 January. London ICE Brent for April declined 24 cents to $80.23.
A report on Friday showed US unemployment is growing, although at a slower pace than expected. The country’s crude inventories probably rose for a sixth straight week, a Reuters survey showed.
The Organisation of the Petroleum Exporting Countries (Opec) will keep oil production targets on hold when it meets in Vienna on 17 March, but could raise output later this year as the world recovers from recession, pushing up demand for fuel, a Reuters poll showed on Monday.
“The whole market picture is still very weak, but sentiment has been very bullish,” said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
“I expect that if eventually we get up to $83.95, people will take profit and get off their longs. I don’t think the market can go past that point.”
US crude inventories gained 1.9 million barrels in the week to 5 March, the poll showed, while gasoline stockpiles may have increased by 300,000 barrels.
Distillates, a fuel category that includes heating oil and diesel, were expected to have dropped 900,000 barrels because of lingering winter weather conditions in the US Northeast, the biggest heating market.
The industry-funded American Petroleum Institute (API) will publish inventory data on Tuesday at 3:00am, followed by government statistics from the Energy Information Administration (EIA) on Wednesday at 9:00pm.
Looking at price chart patterns, oil was unlikely to fall below $80.50, Chu said. “It was a resistance for long, and after we broke through it, it became a support level.”
“But according to fundamentals we should look at $75 or even $70 because we are loosing jobs every month,” Chu said. “GDP is coming up, but it’s not that healthy a recovery unless jobs return.”
The dollar, which for months has been inversely correlated with oil prices, edged up on Tuesday against a basket of currencies. But some traders said the currency has recently influenced crude prices less, especially at times when economic data releases enter the spotlight.
The euro rose slightly against the US dollar on Monday as concerns about Greece’s indebtedness eased, while US equities ended little changed after last week’s rally.