Crude oil keeps a weak hold on $28 ahead of U.S. stockpile data
London (Jan 21) Oil prices extended their fall on Thursday, ahead of key U.S. data expected to show a further increase in oil supplies.
U.S. crude stockpiles are already near levels unseen in decades and their growth adds to the persisting glut of crude around the world, which has battered the market for nearly two years. Worries about China’s economy, world’s second biggest crude consumer, have aggravated the oversupply fears, driving oil prices down by more than a quarter since the beginning of the year.
On Thursday, March-dated Brent crude LCOH6, -0.29% , the global oil benchmark, fell 0.9% to $27.63 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures for March CLH6, -0.60% were trading down 1% at $28.08 a barrel. Both benchmarks fell to their lowest levels since 2003 on Wednesday.
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The American Petroleum Institute, an industry group, reported late on Wednesday that U.S. crude stockpiles climbed by 4.6 million barrels last week. The U.S. Energy Information Administration will release its official data later on Thursday, and analysts polled by The Wall Street Journal expect an increase of 2.9 million barrels.
“The data for last week may highlight one of the near-term challenges facing the U.S. crude market with winter cycle of seasonal refinery maintenance now under way, contributing to a further accumulation of crude oil inventories,” said Tim Evans, a Citi commodity analyst.
A major force behind the decline in prices over the past 19 months has been the resilience of U.S. shale-oil producers, many of whom maintained production levels as prices dropped.
While U.S. production peaked at 9.7 million barrels a day in April, it has remained stable in recent months, at around 9.2 million barrels a day.
The downward pressure on oil prices is also driven by the fear that as China’s economy slows, the country’s insatiable demand for oil will drop. China consumes about 12% of world’s crude, second only to the U.S.
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But not all oil watchers are spooked by China’s slowdown.
“Sure the China’s economy has slowed down, but it is still growing at a 6.9%, which means its oil demand will not be too shabby,” said Barnabas Gan, a commodity analyst at OCBC.
Nymex reformulated gasoline blendstock for February RBH6, -0.40% — the benchmark gasoline contract — fell 0.7% to $1.01 a gallon. ICE gasoil changed hands at $248.25 a metric ton, up $1 from the previous settlement.