Oil under $71 as demand eases

London : Oil hovered below $71 a barrel yesterday, after falling more than two per cent in the previous session following US government inventory data highlighting the weak state of demand in the world's top energy consumer.

US crude for January delivery fell seven cents to $70.60 (Dh259) a barrel by 0953 GMT, after losing almost $2 in its sixth straight day of losses on Wednesday, when it hit the lowest since early October at $70.13.

Brent

London Brent crude gained 12 cents to $72.51.

Oil prices dropped on Wednesday after US Energy Information Administration data showed builds in US refined product stocks, although there was a surprise draw in crude inventories.

"I think today we are seeing a pause after the previous days sharp losses," Carsten Fritsch, oil analyst at Commerzbank in Frankfurt said yesterday.

"The $70 level is holding for now but I think there is more downside potential further forward."

Oil supplies

There were further signs that global oil supplies were rising yesterday as Saudi Arabia restored full term crude allocations to at least two Asian buyers for January and keeping contracted volumes to six others, according to industry sources.

The spread between front-month Brent and US crude oil futures widened to around $2 a barrel yesterday, stretched by the build in stocks at Cushing, Oklahoma, the delivery point for US crude oil futures.

"Despite the drop in overall crude stocks, inventories at Cushing are approaching the record high in February, widening the spread between Brent and WTI (US domestic crude)," Fritsch said.

Crude stocks

The EIA data on Wednesday showed crude stocks at Cushing were up last week by 2.5 million barrels at 33.4 million barrels, near the 35 million-barrel peak hit in February.

Saudi Arabia's move to restore full term crude supply to two Asian buyers, comes ahead of Opec's December 22 meeting, at which most members have said they would not raise production targets.

Ecuador's energy minister on Wednesday said he expected Opec to leave oil output targets unchanged when the group meets later this month, setting the stage for prices to remain between $70 and $80 per barrels.