LONDON: Oil fell to a three-week low around $114 a barrel yesterday, hit by weak eurozone economic data, dampening the prospect of an early recovery and concern the US Federal Reserve might end its stimulus programme sooner than thought.
The drop extended Brent crude’s largest one-day slide in 2013 on Wednesday, alongside declines in other commodities and equities.
Brent crude fell as low as $113.34, the lowest intra-day since the end of January. It pared losses slightly after US government data showed a bigger-than-expected drop in gasoline and distillates stocks to trade down $1.50 at $114.10 a barrel as of 1630 GMT. US crude dropped by $2.04 to $93.18.
“Yesterday was a major sell-off, not just in oil but in other commodities,” said Tony Machacek, a broker at Jefferies Bache in London. “We’ve come off a long way, and just looking at the charts, Brent could come down to the $113 area.”
Since mid-December, hedge funds and other large speculators have nearly doubled their bets that oil prices will rise, amassing positions in Brent and US crude futures and options equivalent to around 440 million barrels of oil, regulatory and exchange data show.
The price of Brent rose by $10 a barrel in the first six weeks of 2013 to hit a nine-month high above $119 on February 8 as signs of strong demand from China and lower Saudi supply raised expectations of a tighter market.
A key level of technical support for Brent yesterday was around $113.10, the 50-day moving average and the lower Bollinger band, said Olivier Jakob, an analyst at Petromatrix. Another to watch was $113.07, the low from Jan. 29.
A day earlier, oil industry sources said top world oil exporter Saudi Arabia, which cut supplies in the last two months of 2012, could raise its output in the second quarter to satisfy higher demand. Investors also assessed the prospect of reduced tension between Iran and the West over Tehran’s nuclear work. A Western diplomat said on Wednesday that major powers were ready to make “a substantial and serious offer” to Iran during talks next week.
Slightly offseting the bearish sentiment, U.S. refined fuel inventories fell more than expected in the week to February 15, US government data from the Energy Information Administration showed yesterday, although US crude inventories rose as refineries processed less oil and imports rose.
Reuters
