Oil edges towards $72 as drop in Asian equities weighs

Oil edges towards $72 as drop in Asian equities weighs

Perth: Oil prices fell towards $72 a barrel on Friday, as a fall in Asian equities markets weighed on sentiments and encouraged investors to take profit.

Still, crude prices are on track to gain about 4% this week, helped by a US government report that showed a larger-than-expected drawdown in crude stocks and rallying stock markets, which was supported by a string of positive economic data.

US crude for October delivery fell 40 cents to $72.07 a barrel by 0348 GMT, after settling down 4 cents on Thursday, when prices slipped as Wall Street closed down after a three-day run-up, on concern recent gains were overextended.

London Brent crude fell 30 cents to $71.28.

“The weaker stock market is causing some risk aversion and that’s pressuring oil and other commodities," said Michelle Kwek, an analyst at Informal Global Markets in Singapore.

“Some traders could also be unwinding their positions in the market ahead of the long holiday in Japan."

While crude is up nearly 62% this year, it is still about 51% off its July 2008 record of more than $147.

Most Asian stocks fell on Friday, with Hong Kong’s Hang Seng Index slipping 0.22% by 0245 GMT and Tokyo’s Nikkei average falling 1.2% after consumer finance firm Aiful Corp said it would ask creditors to push back repayments.

Oil has tracked equities markets closely in recent months as dealers look to stocks as a leading indicator of an economic recovery that could boost ailing energy demand.

Concerns about growing oil supplies from the Organization of Petroleum Exporting Countries (Opec), also weighed on sentiments.

Opec seaborne oil exports, excluding Angola and Ecuador, will rise 200,000 barrels per day (bpd) in the four weeks to 3 October, an analyst who tracks future shipments said on Thursday.

Still, some analysts said the recent string of positive economic data would keep oil prices supported, as data around the world have strengthened the view that a global economic recovery was underway and that energy demand would soon recover.

Economic data on Thursday showed US weekly jobless benefit claims fell unexpectedly last week while US housing starts rose to their highest level since November, providing further encouraging signs of an economic recovery.