Brent oil prices retreat towards 11-year lows
OIL COULD DRAW SUPPORT IF U.S. ENERGY INFORMATION ADMINISTRATION DATA LATER IN THE DAY SHOWS A DRAWDOWN IN U.S. WEEKLY OIL STOCKS
REUTERS: Brent crude oil slid back towards 11-year lows on Wednesday as indications of slowing global energy demand bumped up against record-high inventories.
Benchmark Brent, near US $37 per barrel, traded just US $1 away from those lows reached last week as the primary supportive factor - an expected cold snap in Europe and the United States - was forecast to be short-lived.
Front-month U.S. West Texas Intermediate crude futures were trading at US $36.92 per barrel at 0920 GMT, down 95 cents, or more than 2 percent, from their settlement in the previous session. Brent was down 80 cents at US $36.99 a barrel, a decline of roughly 2 percent.
“There is no significant improvement in the prompt fundamentals,” said Olivier Jakob, managing director of Petromatrix, warning that low traded volumes into the new year made flat prices susceptible to sharp movements.
Crude prices have plunged by two-thirds since mid-2014 as soaring output from the Organization of the Petroleum Exporting Countries, Russia and the United States led to a global surplus of between half a million and 2 million barrels per day.
More recently, a slowing demand outlook, especially in Asia but also Europe, began dragging on prices.
Forecasts that a cold spell in Europe would be short-lived also undercut price support that had helped U.S. crude and Brent rally by around 3 percent in the previous session.
Data in Thomson Reuters Eikon showed that average continental European temperatures were expected to drop from current levels near 5 degrees Celsius towards the seasonal norm of 2.4 degrees by Jan. 3 before rising to as high as 6-8 degrees by Jan. 7. For most of the United States, a brief cold period is also not expected to last much more than a week.
“The weather has been so much above normal that ... it will take a lot of colder temperatures to really reverse the overhang,” Jakob said.
Oil could draw support if U.S. Energy Information Administration data later in the day shows a drawdown in U.S. weekly oil stocks.
A Reuters poll of nine analysts estimated that crude stocks fell 2.5 million barrels in the week ended Dec. 25. The American Petroleum Institute, an industry group, on Tuesday reported a surprise build in U.S. stocks.