Oil Falls on Economy Concerns; OPEC May Maintain Output
Feb. 1 (Bloomberg) — Crude oil fell for a second day in New York on concern that a recession in the U.S. may curb fuel demand in the world’s biggest energy-consuming nation and prompt OPEC to maintain production targets.
Oil fell 1.2 percent, extending yesterday’s 3 percent decline, after a report showed the number of Americans seeking unemployment benefits for the first time jumped to a 27-month high. Increasing world oil supplies will do little to help the global economy, OPEC President Chakib Khelil said before a meeting of the producer group in Vienna today.
“There’s no compelling case for OPEC to increase production because their analysis shows that markets are adequately supplied,” David Moore, a commodity strategist at Commonwealth Bank of Australia, said by telephone from Sydney today. Concern about a U.S. recession “adds further uncertainty to the outlook for demand.”
Crude oil for March delivery fell as much as $1.11, or 1.2 percent, to $90.64 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was trading at $90.91 a barrel at 2:06 p.m. in Singapore.
The contract fell as low as $89.58 after the U.S. jobless claims report yesterday and settled 58 cents, or 0.6 percent, lower at $91.75 a barrel.
Oil prices gained the preceding five sessions after the U.S. Federal Reserve cut interest rates twice in two weeks to bolster confidence in financial markets and shore sliding U.S. equities.
“The Fed is acting very aggressively, but there’s concern that they won’t be successful,” Rick Mueller, director of oil practice at Energy Security Analysis Inc. in Wakefield, Massachusetts, said yesterday.
OPEC Quotas
The Organization of Petroleum Exporting Countries produces more than 40 percent of the world’s oil. World inventories are “good” and prices include a $30 speculative premium for politics and the weak U.S. dollar, Khelil said. A change to the group’s quotas today is unlikely.
OPEC ministers from Venezuela, Libya and Qatar said the group will rebuff a request from U.S. President George W. Bush for more oil. The leaders will delay until March deliberations on a supply cut to bolster prices, which have slipped 8 percent from a record $100.09 a barrel on Jan. 3.
“A cut is not on the cards,” he said. “Psychologically, it’s not going to help the world economy.”
Brent crude for March settlement traded 68 cents, or 0.7 percent, lower at $91.53 a barrel at 12:59 p.m. Singapore time. The contract dropped 32 cents, or 0.4 percent, to $92.21 a barrel on London’s ICE Futures Europe exchange yesterday.
“Right now, everybody is focused on the macroeconomic picture,” said Jonathan Benjamin, senior analyst at New Wave Energy LLC in Aptos, California. “Are we going into a recession? Are we going to be using less oil this year because we’re going to be producing less?”
U.S. Stockpiles
While U.S. oil stockpiles are “relatively low compared with last year” gasoline inventories are rising and fuel demand appears to be slowing, Benjamin said. Oil will likely trade between $90 and $92 near-term as traders and investors try to gauge the direction of the U.S. economy, he said.
U.S. gasoline demand fell to 8.94 million barrels a day last week, based on deliveries by refiners, the Energy Department reported Jan. 30. It was the lowest in two years.
Crude-oil inventories rose 3.56 million barrels to 293 million barrels, taking their three-week gain to 3.6 percent. Gasoline stockpiles rose 3.56 million barrels to 223.9 million barrels, the highest since Feb. 9.
“The possibility of a recession has speculators on edge,” James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois, said yesterday. “We’re already recording a drop in gasoline demand growth, and now we could see a drop in fuel demand from the industrial and manufacturing sectors.
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