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Oil falls more than 1% on economy worries
Oil fell more than one per cent on Thursday, pressured by concerns over troubles in financial markets despite another cut in US interest rates, while rising fuel inventories in the top energy consumer also weighed.
- Reuters
- Published: 00:52 February 1, 2008
London: Oil fell more than one per cent on Thursday, pressured by concerns over troubles in financial markets despite another cut in US interest rates, while rising fuel inventories in the top energy consumer also weighed.
US light crude for March delivery dropped $1.17 to $91.16 a barrel by 1336 GMT, more than reversing a gain of 69 cents on Wed-nesday.
London Brent crude lost 91 cents a barrel to $91.62.
European stock markets were down on Thursday despite the hefty 50 basis point cut in interest rates from the US Federal Reserve to try to avert an economic slowdown.
Market sentiment took a further knock after data released by the US government showed a larger-than-expected rise in workers filing claims for jobless aid last week.
Supply
"The likelihood of the Organisation of Petroleum Exporting Countries [Opec] adding any additional barrels to the market are rapidly diminishing amidst all the economic gloom from the US," said Rob Laughlin, analyst at broker MF Global.
Iran oil minister Gholamhossein Nozari said yesterday oil markets were well supplied and he saw no need for Opec to boost production when it meets in Vienna today.
The prospect of a cut in Opec output levels at some stage has even been raised.
"With the lower seasonal crude oil requirement, then perhaps we should take off the market what we have been recently increasing," a delegate from one of Opec's bigger producers said.
Prospects
The prospect of a downturn in the US economy alongside seasonal supply-demand factors has contributed to a decline in speculative flows into oil.
"There will be a seasonal stock build in the coming weeks and the long-awaited exit of speculative fund capital seems to have begun," said Markus Mezger, a partner at hedge fund Tiberius Asset Management.
"We are not too optimistic that prices above $80 a barrel could be sustained in 2008."
US Department of Energy inventory data published on Wednesday showed higher-than-expected builds in crude and gasoline stocks.
The Energy Information Administration said US crude stocks rose by a bigger-than-expected 3.6 million barrels last week, while gasoline stocks rose by 3.6 million barrels, also more than expected.
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