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Oil prices fall amid dropping demand
By Alex Kennedy |
February 21, 2009, Saturday
|
Print Edition
Print Edition
OIL prices fell below US$39 a barrel in Asia yesterday as investor concerns about weak crude demand continued to linger even after lower-than-expected inventory numbers sparked a big gain overnight.
Light sweet crude for March delivery on the New York Mercantile Exchange fell 78 cents to US$38.70 a barrel amidst weak investor and consumer demand. The contract on Thursday surged US$4.86, or 14 percent, to settle at US$39.48.
Most trading volume was with the April contract, which fell 89 cents to US$39.29 after jumping US$2.77 to settle at US$40.18.
The jump in prices on Thursday was fueled by an Energy Information Administration report that showed crude stocks decreased 200,000 barrels for the week ended February 13.
Analysts had expected stocks to grow by 3.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos. Inventories have risen more than 30 million barrels in the prior six weeks.
The report's four-week moving average showed that gasoline consumption rose 0.8 percent.
But investors were skeptical of a sustained recovery in crude demand.
"It was a significant move last night but there's not much out there that can create a bullish story," said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney, yesterday. "The demand outlook is very weak and there's nothing to suggest that it will improve in the near term."
Some evidence suggested that demand remained weak. The United States Department of Transportation said motorists drove 6.1 billion fewer kilometers in December than they did a year earlier. The 1.6 percent decline in driving marks the 14th consecutive month of declining driving with the decline totaling 185 billion kilometers.
Rising US joblessness continues to drag on demand amid the worst recession in decades. The Labor Department said yesterday that the number of people receiving unemployment benefits jumped to an all-time high near 5 million, while new jobless claims remain well above 600,000.
Crude investors look to stock markets for overall sentiment on the economy, and the Dow Jones Industrial Average fell to a six-year low yesterday, sliding 1.2 percent. Most Asia stock indices also fell at the open yesterday.
The Organization of Petroleum Exporting Countries has pledged to cut 4.2 million barrels a day since September, and the group's leaders have said recently that they may reduce output more at a meeting on March 15.
Investors have so far brushed off OPEC supply cuts, sending prices down about 73 percent from a record high of 147.27 in July.
Light sweet crude for March delivery on the New York Mercantile Exchange fell 78 cents to US$38.70 a barrel amidst weak investor and consumer demand. The contract on Thursday surged US$4.86, or 14 percent, to settle at US$39.48.
Most trading volume was with the April contract, which fell 89 cents to US$39.29 after jumping US$2.77 to settle at US$40.18.
The jump in prices on Thursday was fueled by an Energy Information Administration report that showed crude stocks decreased 200,000 barrels for the week ended February 13.
Analysts had expected stocks to grow by 3.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos. Inventories have risen more than 30 million barrels in the prior six weeks.
The report's four-week moving average showed that gasoline consumption rose 0.8 percent.
But investors were skeptical of a sustained recovery in crude demand.
"It was a significant move last night but there's not much out there that can create a bullish story," said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney, yesterday. "The demand outlook is very weak and there's nothing to suggest that it will improve in the near term."
Some evidence suggested that demand remained weak. The United States Department of Transportation said motorists drove 6.1 billion fewer kilometers in December than they did a year earlier. The 1.6 percent decline in driving marks the 14th consecutive month of declining driving with the decline totaling 185 billion kilometers.
Rising US joblessness continues to drag on demand amid the worst recession in decades. The Labor Department said yesterday that the number of people receiving unemployment benefits jumped to an all-time high near 5 million, while new jobless claims remain well above 600,000.
Crude investors look to stock markets for overall sentiment on the economy, and the Dow Jones Industrial Average fell to a six-year low yesterday, sliding 1.2 percent. Most Asia stock indices also fell at the open yesterday.
The Organization of Petroleum Exporting Countries has pledged to cut 4.2 million barrels a day since September, and the group's leaders have said recently that they may reduce output more at a meeting on March 15.
Investors have so far brushed off OPEC supply cuts, sending prices down about 73 percent from a record high of 147.27 in July.
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