NEW YORK: Oil prices fell by more than $2 yesterday as Libya prepared to restart a major oilfield and on speculation of a sharp rise in crude stockpiles in Cushing, Oklahoma.
After ending last year almost unchanged from where they started, Brent futures led losses on a range of factors, including data showing slowing economic expansion in China, the world’s no. 2 oil consumer, a stronger US dollar and an approaching US Northeast storm that may temporarily dampen fuel demand.
Libya’s National Oil Corp (NOC) said yesterday that it plans to restart the El Sharara oilfield and hopes to resume output within days after protesters agreed to suspend a strike that has blocked the field since the end of October. Libya’s output is still less than 250,000 b/d, down from 1.4m b/d in July.
Brent crude was down $2.45 to $108.35 a barrel by 1826 GMT, dropping below the 50-day moving average of $109.17 for the first time in two weeks. US crude sank by as much $2.52, below the 50-day moving average of $96.20, to $95.90 a barrel.
“Really what’s moving the market back down is Libya back online,” said Bill Baruch, senior market strategist at iitrader.com in Chicago. “We didn’t expect them to be back until the end of Q1.”
Losses deepened earlier in the session after a report by industry group Genscape showed a one million barrel rise in stockpiles at Cushing, Oklahoma, the benchmark delivery point for US oil futures, market sources said.
Official US government data, due out two days later than usual at 1600 GMT today due to the New Year’s Day holiday, is expected to show a fifth consecutive draw in nationwide crude oil stockpiles.
Data from the American Petroleum Institute showed stocks fell last week by nearly double the expectation in a Reuters poll. The decline has been largely attributed to producers’ attempts to avert taxes and is no match for US production which has risen to a 25-year high, analysts said.
Motor fuel prices matched crude’s losses as a powerful storm expected to bring heavy snow and Arctic cold to the densely populated US Northeast will likely force motorists off the road, said Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania.
“I think with gasoline it could potentially be 70 million (people) in the path of two converging snowstorms and that will impact demand,” he said. “It’s already happened in the Midwest.”
US ultra low-sulfur diesel futures fell 5.78 cents to $3.0074 per gallon while RBOB petrol futures fell 6.64 cents to $2.7205.
As well, more than 1,500 flights were cancelled in the United States due to the storm, according to web site FlightAware.com.
Adding to pressure on oil, growth in factory activity in China slowed in late 2013, according to purchasing managers’ indexes published by the government and HSBC, weighed by shrinking export orders.
The market also eyed potential increased oil output from Iran. The Islamic Republic and six world powers will implement an agreement in late January obliging Tehran to suspend its most sensitive nuclear work. That raises the prospect of an increase in Iranian crude exports over 2014, analysts said. Reuters
