TheNigerianVoice Online Radio Center

U.S. Crude Oil Hits Six-And-A-Half-Year Low On High Stocks, China

Source: thewillnigeria.com
Listen to article

U.S. crude oil fell to its lowest in almost 6-1/2 years on Friday as huge stockpiles and refinery shutdowns heightened concerns about global oversupply and the Chinese economy.

Oil had already tumbled more than 3 percent on Thursday, driven by a report that stocks at Cushing, Oklahoma, the delivery point for U.S. crude futures, rose more than 1.3 million barrels in the week to Aug. 11.

U.S. crude CLc1 hit an intraday low of $41.35 a barrel, its lowest since March 4, 2009, before recovering to $42.13 by 1040 GMT, down 10 cents on the day.

Brent crude LCOc1 traded at $49.21, unchanged from its previous settlement and some way off its 2015 low of $45.19 reached in January. The front-month September Brent contract expires on Friday.

U.S. crude is much weaker than the North Sea benchmark, partly due to refinery outages sapping U.S. demand. The largest of those refineries – BP’s (BP.L) 413,500-barrels-per-day (bpd) facility in Whiting, Indiana, shut two-thirds of its capacity for repairs that could last a month or more.

Robin Bieber, director and technical analyst at London brokerage PVM Oil Associates, said the U.S. crude oil contract, also known as West Texas Intermediate or WTI, had become somewhat dislocated from Brent.

“The contracts are not all on the same technical page and this causes a lack of clarity,” Bieber said. “WTI could plunge but the rest hold steady.”

Commerzbank analyst Carsten Fritsch said he didn’t expect an accelerated drop in prices, but rather “a slow grind lower”:

“As long as (Whiting) refinery is out of service this will add to stocks in the U.S., which is WTI’s main driver now.”

Goldman Sachs said a weaker Chinese yuan was putting downward pressure on all commodity markets, signaling a change in global macroeconomic conditions.

“We believe the net commodity market effects are bearish,” it said in a note to clients.

Analysts said prices could drop further still unless oil production started to fall, particularly in North America.

“The lowest crude prices in six years might not be enough to put the brakes on the U.S. supply growth. U.S. shale players are actively cutting costs and some players are profitable at less than $30 per barrel,” ANZ Bank said.

On the demand side, China’s crude oil imports have so far remained strong as authorities build up strategic reserves and consumers keep spending despite the slowing economy.

REUTERS