Oil falls on US sup­ply record, weak de­mand out­look

The Pak Banker - - MARKETS/SPORTS -

Oil slid on Thurs­day, dented by record U.S. crude in­ven­to­ries at the Cush­ing de­liv­ery point, wor­ries about the de­mand out­look, and as Gold­man Sachs said prices would re­main low and volatile un­til the se­cond half of the year. In a sign that pro­duc­ers are still com­pet­ing for mar­ket share by low­er­ing prices, Iran of­fered its crude to Asia at a dis­count to ri­val OPEC pro­ducer Saudi Ara­bia.

Brent crude fu­tures LCOc1 were down 31 cents at $30.53 per bar­rel at 0850 GMT. U.S. West Texas In­ter­me­di­ate (WTI) crude fu­tures CLc1 were at $26.76 per bar­rel, down 69 cents and not far off the $26.19 in­tra­day low hit in Jan­uary that was their weak­est price since 2003.

"We're grind­ing lower on bear­ish fun­da­men­tals," Bjarne Schiel­d­rop, chief com­mod­ity an­a­lyst at SEB in Oslo, said.

"There's a price fight within OPEC for Asian mar­ket share, and there are wor­ries that stor­age ca­pac­ity is go­ing to be breached." He added that oil's fall was also part of a gen­eral move in global mar­kets away from riskier as­sets.

In­ven­to­ries at the Cush­ing, Ok­la­homa de­liv­ery point for U.S. crude fu­tures rose to an all­time high just shy of 65 mil­lion bar­rels, data from the govern­ment's En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA) showed on Wed­nes­day.

Gold­man Sachs said the over­hang in oil sup­plies, to­gether with an eco­nomic slow­down in China, means prices will re­main low un­til the se­cond half of the year.

"The risks of China growth con­cerns and oil price down­side ... ma­te­ri­alised faster than we an­tic­i­pated," the bank said in a client note.

Iran tra­di­tion­ally sets monthly prices to cus­tomers in Asia - its big­gest mar­ket - in par­al­lel with Saudi Ara­bian crude prices, yet for March it of­fered buy­ers its sup­plies at a dis­count of 10 cents per bar­rel com­pared to Arab Medium, a Saudi grade of sim­i­lar qual­ity.

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