Oil slips to $49 as US crude in­ven­to­ries hit record

The Financial Daily - - INTERNATIONAL -

LON­DON: Oil slipped to $49 a bar­rel on Wed­nes­day af­ter US crude stocks soared to the high­est on record last week, and as a firmer dol­lar weighed on prices.

The US En­ergy In­for­ma­tion Ad­min­is­tra­tion said US crud­e­stocks rose by 8.9 mil­lion bar­rels last week to 406.73 mil­lion bar­rels, the high­est level since records be­gan in 1982.

While the build was not quite as large as the 12.7 mil­lion bar­rel in­crease re­ported by in­dus­try group the Amer­i­can Pe­tro­leum In­sti­tute on Tues­day, prices re­mained un­der pres­sure de­spite large draws in gaso­line and dis­til­late in­ven­to­ries.

Gaso­line stocks fell by 2.6 mil­lion bar­rels while dis­til­late stocks, which in­clude diesel and heat­ing oil, fell by 3.9 mil­lion bar­rels, the EIA said.

"Re­fined prod­uct de­mand con­tin­ues to be the sole source of strength for the mar­ket, but it is not enough to over­come the tidal wave of crude oil sup­plies for now," said John Kil­duff at Again Cap­i­tal LLC in New York.

Brent crude oil for March de­liv­ery was down 52 cents at $49.08 a bar­rel by 1550 GMT, hav­ing touched an in­tra­day low of $48.65. It hit a near six-year low of $45.19 a bar­rel two weeks ago.

US crude for March de­liv­ery fell $1.17 to $45.06 a bar­rel, and hit an in­tra­day low of $44.52.

Fast grow­ing US shale out­put has pushed oil prices al­most 60 per cent lower since June, with losses ac­cel­er­at­ing af­ter the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries said it would not cut out­put in a bid to pre­serve its mar­ket share.

An­a­lysts at Gold­man Sachs said in a note pub­lished on Jan. 27 they ex­pected US crude, also known as WTI, to re­main near $40 a bar­rel in the first half of this year.

"(That) should slow sup­ply growth and bal­ance the global oil mar­ket by 2016," the Gold­man an­a­lysts said.

"We then ex­pect oil prices to move to the mar­ginal cost of pro­duc­tion," which the bank pegged at $65 a bar­rel for WTI and $70 a bar­rel for Brent.

Brent has con­sol­i­dated in a nar­row range just be­low $50 in the past two weeks as traders as­sess whether fur­ther price falls would push too many small pro­duc­ers out of the mar­ket. -Reuters

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