SINGAPORE: Brent crude held at $120 on Wednesday, after posting steep losses in the previous session, as a cut in global oil consumption forecast by the EIA and an unexpected surge in US crude stocks reinforced fears demand growth may slow.
The cut by the US Energy Information Administration (EIA) followed weak economic numbers from the two top oil consumers - China and the United States - suggesting the global economy may be in more trouble than it appeared. These factors overshadowed concerns of supply disruption from the Middle East.
Brent traded 12 cents higher at $120 a barrel by 0639 GMT, after settling $2.79 lower at its weakest since Feb. 17. The 2.27 per cent slide on Tuesday was the biggest one-day per centage loss since Dec. 14.
US oil gained 24 cents to $101.26 a barrel, after settling down $1.44 at $101.02, the lowest since Feb. 14 and below its 100-day moving average of $101.65.
The broader markets, including oil, are on a risk-off mode at this point because of the series of negative numbers we have seen recently, said Natalie Robertson, an analyst at ANZ. Oil markets would be flat to lower over the next few days, with support coming in if there are worries on the supply side.
The American Petroleum Institute (API) reported crude stocks rose 6.6 million barrels, three-fold more than a forecast of 2.1 million barrels in a poll by Reuters. This week's rise in crude stocks follows the largest two-week build in the past 11 years reported by the EIA last week. The EIA is due to issue inventory data later in the day.
While it is not unusual to see a build in crude stocks at this point because demand usually falls with many refineries doing maintenance, it is still weighing on sentiment, Robertson said.
Asian shares fell for a third day, tracking a steep fall on Wall Street, while the dollar declined due to the uncertainty surrounding global growth. Copper futures in Shanghai lost almost 3 per cent to hit three-month lows, tracking a steep decline in London on Tuesday.
If the risk-off mentality sticks around for a few more days, we could be seeing US crude below $100 per barrel depending on how the US inventory figures pan out, said Tim Waterer, a senior forex dealer at CMC Markets, in a report.
Brent could fall further to $117.80 per barrel, as indicated by its wave pattern and a Fibonacci projection analysis, while US oil is expected to clear a support at $100.81 per barrel and fall more to $99.37, according to Reuters technical analyst Wang Tao.
Oil is also under pressure as concerns about European debt have resurfaced with investors worrying Spain could become the next source of contagion in the euro zone due to its weak fiscal position. Spain's banks may need more capital if the economy deteriorates, the head of the central bank said.
Escalating Spanish yields and signs of abating Chinese commodity demand have served to deflate risk assets, with investors clearly adopting a proceed-with-caution trading mentality this week, Waterer said. Greece is no longer the word when it comes to European risk.
CONSUMPTION FORECAST
The EIA forecast global oil consumption to average 88.81 million barrels per day in 2012, compared with last month's projection of 88.96 million bpd.
The EIA expects oil markets to weaken this year as a result, even though exports from Iran fall as the United States and Europe tighten sanctions on the Islamic Republic to force it to abandon its nuclear programme.
Iran has agreed to renew discussions with the permanent members of the UN Security Council - the United States, Russia, China, Britain and France - plus Germany last month, more than a year after previous talks failed. The next round would be in Baghdad following this week's negotiations in Istanbul.
The fact that they are planning a second meeting suggests that there may be some progress, said Robertson. That may remove some risk premium from the prices. But we will need to see both sides actively working towards a resolution for those premiums to come down substantially.
No comments:
Post a Comment