Oil below $43 after 12% fall on demand worry

Oil below $43 after 12% fall on demand worry
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First Published: Thu, Jan 08 2009. 08 53 AM IST
Updated: Thu, Jan 08 2009. 08 53 AM IST
Singapore: Oil hovered below $43 on Thursday after tumbling 12% overnight, its largest percentage drop in seven years, as a US government report showed crude stocks rose much more than expected in the world’s top energy consumer.
The market will be eyeing weekly US jobless claims due later in the day, and December non-farm payroll and unemployment data on Friday, which are likely to be dismal, for further clues on future demand.
US crude for February delivery was up 14 cents at $42.77 a barrel by 8am, after sinking 12.3% to $42.63 overnight, the biggest single-day percentage loss since 24 September, 2001.
London Brent crude was up 8 cents at $45.94.
“Oil prices are likely to remain choppy, and in the near term, the next potential trip-wire is US non-farm payrolls data on Friday, which is likely to add to concerns over the US economic outlook,” said David Moore, a commodity strategist with the Commonwealth Bank of Australia.
Overnight data from the US Energy Information Administration (EIA) showed that crude stocks swelled by 6.7 million barrels, more than seven times the 900,000-barrel increase analysts had expected.
Adding to the gloomy outlook, a bearish reading on private sector payrolls from ADP Employer Services on Wednesday signalled more weakness in the more comprehensive employment data report from the US Labour Department due on Friday.
The ADP data showed that private employers shed 693,000 jobs in December, up from 476,000 jobs in the prior month and far more than economists estimated.
The Labour Department will also release weekly first-time claims for jobless benefits later on Thursday. Economists in a Reuters survey forecast a total of 540,000 new filings compared with 492,000 in the prior week.
Oil has fallen more than $100 from a record peak of over $147 a barrel in July, as the global economic downturn hits demand for fuel. It settled at $33.87 a barrel on 19 December, the lowest level since 10 February, 2004.
Mounting evidence of Opec’s compliance with production cuts and widening supply disruptions from a natural gas row between Russia and Ukraine could provide some price support, analysts said. Signs of Opec members implementing the group’s biggest-ever output cuts grew this week after Kuwait and Iran told customers of bigger supply curbs this month in a bid to prop up prices.
Russia shut down all gas flows to Europe through Ukraine on Wednesday and told Kiev it would restore supplies only after the latter had agreed to pay full market prices. The dispute has cut heating to tens of thousands of households in Bulgaria and hit supplies as far west as France and Germany as Europe faced freezing mid-winter temperatures.
The bleak economic data overshadowed the intensifying Gaza conflict, which had underpinned oil prices earlier in the week.
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First Published: Thu, Jan 08 2009. 08 53 AM IST
More Topics: Markets | Oil | Crude | Opec | Russia |