Oil prices fell below US$48 a barrel today as data showed crude oil stockpiles were continuing to swell in the US and Japan. Inventories are rising despite a series of production cuts by OPEC, as demand from refineries is receding more quickly than supply. The US government data, released today in Washington, showed crude inventories in the country had increased by a further 1.6 million barrels from last week's 15-year high.
US crude futures dropped as low as $47.37 a barrel before rebounding to slightly above $48 on the New York Mercantile Exchange. Industry data released a day earlier had suggested a much larger 6.9 million-barrel build-up during the week. "Demand in the US is weak and will probably stay weak," said Eugen Weinberg, an analyst at Commerzbank in Frankfurt. Crude stockpiles have continued to build in the US despite falling imports.
Inventories in the world's largest consumer now represent about four months of import cover, said the US-based Schork Group. "You can't swing a cat without hitting a barrel of crude oil in the United States," the firm said in a research note. Stockpiles also rose last week in Japan, the world's third-biggest energy consumer, as the country's worst recession in more than 60 years cut demand. Other factors weighing on crude prices today included the strength of the US dollar against other major currencies and worries about corporate earnings, which had prompted sell-offs on US, Asian and European equity markets after Alcoa, the big US aluminium company, reported a larger-than-expected quarterly loss.
Stock market traders expect more bad news as the US corporate earnings season gets under way. The global recession has caused worldwide energy demand to slump, not least because energy-intensive industries such as aluminium smelting have drastically cut production. As a result, crude prices have tumbled from a peak of $147 a barrel last July. Despite the constantly gloomy economic data in recent months, crude rallied above $50 a barrel last week after the Group of 20 leading and emerging economies announced a US$1.1 trillion (Dh4.04 trillion) stimulus package to spur economic recovery.
But OPEC, which agreed late last year to cut its output by a record 4.2 million barrels per day to stem crude's rapid price decline, now seems resigned to prices remaining well below the $75 a barrel it has said would be needed to stimulate oil industry investment. On Tuesday, a source close to the OPEC president, Jose Botelho de Vasconcelos, who is also the oil minister of Angola, said the oil exporters' group could live with oil prices between $50 and $60 for the rest of the year. @Email:tcarlisle@thenational.ae
