NEW YORK: Oil prices tumbled yesterday, with Brent crude falling below $98 per barrel, as rising US fuel supplies added to overall concern about global oil demand.
A report from the US government’s Energy Information Administration showed increases in distillate inventories and in petrol supplies on the US East Coast, which includes the New York harbour. Brent crude, US crude, US petrol and US heating oil all fell more than 2 percent during mid-day trading. US crude and Brent crude each lost more than $2 per barrel.
Stephen Schork, the editor of The Schork Report, said Brent’s dip below $98 triggered a sell-off by breaching a key technical support level, or a number used by traders who base their activity on charts. “$97.91 in Brent was a key technical number, so once we hit that level, probably triggered a bunch of selling,” said Schork. “This is all continuation selling - the bulls are getting stopped out and bears are stepping in to fill the void.”
The North Sea benchmark has lost more than 7 percent over the past five sessions in a wider commodities rout triggered by data showing growth in China, the world’s second-largest oil burner, had slowed unexpectedly in the first three months of 2013.
Brent crude shed $2.35 to $97.56 by 12:22pm EDT (18:22 GMT), after sinking earlier to $97.26, the lowest since July 2012. US crude slipped $2.37 to $86.35.
The US dollar strengthened against the euro and the yen after comments from a European Central Bank official stoked speculation of an interest rate cut in eurozone. A stronger dollar makes dollar-priced commodities more expensive. The EIA report showed US crude inventories fell unexpectedly last week, while distillates stocks posted a surprise build and gasoline supplies fell slightly more than forecast. However, petrol stocks on the US East Coast are up 5.3 million barrels over the same time last year.
Distillate stockpiles, which include heating oil and diesel, rose 2.36 million barrels, compared with forecasts for a draw of 500,000 barrels. Stocks at the Cushing, Oklahoma, crude storage hub rose 1.08 million barrels to 51.15 million. Crude imports fell 289,000 barrels per day to 7.39m b/d.
The EIA report follows a cut in growth projections by the International Monetary Fund (IMF), for this year and next. The head of the International Energy Agency, Maria van der Hoeven, said the oil price decline was proof that the market was adequately supplied. “For now there is no immediate reason — other than short covering — to suggest that oil prices are ready for a strong move to the upside,” said Chirichella.
While further weakness in Brent crude cannot be ruled out, oil prices are unlikely to fall below the $100 a barrel mark past the second quarter, Barclays said.
Reuters
