Oil ap­proaches key $40 level in Asian trade

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Oil prices slid to a fresh six and a half year low in Asia Thurs­day, ap­proach­ing the key $40 a bar­rel level af­ter a sur­prise rise in US in­ven­to­ries added to con­cerns of a sup­ply glut.

US bench­mark West Texas In­ter­me­di­ate (WTI) for de­liv­ery in Septem­ber, which ex­pires Thurs­day, dipped 32 cents to $40.48 af­ter fall­ing sharply in New York to its low­est level since March 2009. Brent crude for Oc­to­ber dropped 25 cents to $46.91 a bar­rel. "US stock­piles un­ex­pect­edly ex­panded when the mar­ket was look­ing at a con­trac­tion, which height­ened the global over­sup- ply con­cerns," said Bernard Aw, a mar­ket strate­gist at IG Mar­kets in Sin­ga­pore. "This added pres­sure to crude prices, and we see WTI drop be­low $41, head­ing to­wards the key $40 level. We could see more down­sides, given that the cur­rent con­di­tions re­main un­favourable to oil."

The US Depart­ment of Energy on Wed­nes­day said oil stock­piles rose 2.6 mil­lion bar­rels in the week end­ing Au­gust 14, and re­ported a 300,000 bar­rel rise at the closely watched Cush­ing, Ok­la­homa trad­ing hub. The sur­prise jump in in­ven­to­ries at a time when they nor­mally fall added to con­cerns of a global sur­plus, par­tic­u­larly as signs emerge that de­mand is fal­ter­ing in top energy im­porter China.

An­a­lysts pre­dict oil could now reach lev­els not seen since the throes of the fi­nan­cial cri­sis, pres­sured by a strong dol­lar and the an­tic­i­pated re­turn of Ira­nian oil to world mar­kets. But Daniel Ang, an in­vest­ment an­a­lyst with Phillip Fu­tures in Sin­ga­pore, said he ex­pects WTI to be sup­ported at $40 a bar­rel in Thurs­day s trad­ing ses­sion.

"Tech­ni­cally, we are still see­ing a very bear­ish mo­men­tum, how­ever for prices to break be­low $40 is go­ing to be an ar­du­ous task," he said. "We see $40 for WTI to be a strong psy­cho­log­i­cal sup­port. Thus, we would un­likely think that this would break dur­ing Asian hours (Thurs­day)."

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