Thursday, December 4, 2008

Oil falls below US$46

OIL fell below US$46 a barrel to near four-year lows on Thursday, extending four consecutive days of falls as continued demand worries minimised bullish draws in US oil stocks.

Oil prices have lost more than US$100 a barrel since an all-time high of US$147.27 hit in July, and some 16 per cent from last week, as demand is seen weakening worldwide and analysts expect it to contract this year and next.

US light crude for January delivery fell 83 cents to US$45.96 (S$70.08) a barrel by 0228 GMT (10.28am Singapore time), off an earlier low of US$45.75, the lowest since a US$45.42 low hit on Feb 10, 2005.

Oil settled down 17 cents at US$46.79 on Wednesday.

London Brent crude edged down 34 cents to US$45.10.

'Stabilisation in macroeconomic expectations is likely to precede any switch in oil market sentiment away from a mainly demand-side focus,' Barclays Capital said in its weekly oil data review.

Bullish oil data on Wednesday pushed prices higher during the session, when the US Energy Information Administration said crude stocks fell 400,000 barrels in the week to Nov 28, against an expected 1.7 million barrels build.

Distillate stocks, which include heating oil, fell 1.7 million barrels to 125 million, against a forecast for a 300,000-barrel increase, while gasoline supplies dropped 1.6 million barrels, having been expected to rise by 900,000 barrels.

But the product inventory falls came amid lower refinery utilisation, which fell 1.9 percentage points to 84.3 per cent of capacity last week against a predicted rise of 0.2 percentage point, showing weakening demand.

'Refiners began to cut processing rates significantly,' said Mr Jan Stuart, economist in New York for UBS, in a report.

Worries about a deepening economic downturn resurfaced as a measure of the US service sector, which represents about 80 per cent of US economic activity, slumped further than expected to a record low in November, according to the Institute of Supply Management.

The Institute said its non-manufacturing index came in at 37.3 versus 44.4 in October, and against expectations for a reading of 42.0.

Adding to the gloom, US private employers cut 250,000 jobs in November, a 7-year high, and US third-quarter labour costs were revised lower as the recession hit jobs.

Growing economic woes and falling prices have prompted oil producer group Opec to consider another round of cuts to oil output when it next meets on Dec 17 in Algeria. -- REUTERS

No comments: