Brent oil extended further losses and dropped below $102 on Friday, pressured by worries about demand in the United States – worlds biggest oil consumer that accounts for more than 20% of global consumption.
The Energy Information Administrations report published on Thursday had some controvertial effects initially, but ultimately led to a decrease in oil prices. U.S. Crude Oil Inventories increased by 3 million barrels last week and reached 397,6 million barrels, showed the report. Forecast was for a decline of 600 000 barrels to 393,8 million. Crude oil inventories stood at 394,6 million barrels the preceding week, when stockpiles declined by 350 000 barrels.
Although crude reserves showed an increase, oil prices jumped right after the report was published due to a surprising fall in gasoline stockpiles. The Energy Information Administration’s reported gasoline inventories fell to a seasonally adjusted rate of 1.514 million barrels, compared to an increase of 3.015 million barrels the preceding period. This only had a temporary effect though because the decline wasnt enough to offset the build-up in the preceding weeks.
BNP analysts said for Reuters: “In the case of gasoline, while the draw was larger-than-expected, the latest weekly stock change only partially reverses a large build of a week earlier and gasoline stocks remain ample at the top of the recent five-year range.”
Jonathan Barratt, chief executive of BarrattBulletin said for Reuters: “Given where the inventories are, given where the economies are, oil is very expensive at these levels”.
Oil prices found some support by the weakened dollar after the disappointing U.S. data, published on Thursday. U.S. Q1 GDP growth was revised downwards to 2.4%, compared to 2.5% according forecasts, thus dampening speculation about an earlier-than-anticipated slowdown of Fed’s Quantitative Easing program. Initial jobless claims rose by 10 000 to 354 000 and missed forecasts of a 4 000 decline to 340 000. Market players have largely been tracking the shifting expectations about Fed’s monetary easing program this year. Negative U.S. data, which has been piling recently suggests the stimulus won’t be coming to an end any soon.
Investors are awaiting news from the OPEC meeting in Vienna today, which would play a significant role in oil pricing, if an unexpected change of OPECs quota is voted. Most analysts predict the Organization of the Petroleum Exporting Countries will not change its production pace. Ali al-Naimi, oil minister for Saudi Arabia, said that current conditions are “the best environment for the market” and that “demand is great”.
Commodity traders are also looking into Chinas official Purchasing Managers Index, scheduled for Saturday. It could play a significant role in oil pricing as reduced demand from China will further pressure prices down. The Asian nation is the worlds second biggest oil consumer and accounts for more than 10% of the global consumption.
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