OIL PRICES fell 2.2 per cent as deepening economic gloom and soaring crude inventories in the United States eclipsed geopolitical tensions that have put world supplies at risk.
The decline followed Wednesday’s 12 per cent drop, which marked the biggest daily percentage decline in the price of crude oil in more than seven years.
“This morning crude was trying to rally a bit, but more figures kept coming out from the US and they were very bearish indeed,” said Sucden trader Rob Montefusco.
US crude for February delivery fell 93 cents to settle at $41.70 a barrel, while London Brent crude fell $1.19 to $44.67 a barrel.
Oil prices have dropped more than $100 a barrel since July as a global financial crisis has cut consumer and business energy demand, threatening to shrink total world oil usage for the first time in 25 years.
A US government report yesterday showed the number of people remaining on jobless rolls last week rose to a 26-year high, even as new claims for unemployment benefits slipped.
Adding to the economic gloom, Wal-Mart Stores, which accounts for a tenth of US retail spending, reported a disappointing sales performance in December and cut its earnings outlook.
Oil prices tumbled on Wednesday after the US Energy Information Administration’s weekly report showed crude stocks rose last week by 6.7 million barrels, more than seven times the 900,000-barrel increase analysts had expected.
“Brent is done going under $40, but WTI (UScrude) is a different animal altogether . . . crude stocks in the midwest are very high because Cushing is a landlocked base with pipes that only go in one direction,” Christopher Bellew of Bache Financial said.
Crude oil stocks in Cushing, Oklahoma, the delivery point for US crude futures, rose by 4.1 million barrels last week, reaching a record high of 32.2 million barrels.
Prices had gained some support earlier from violence in Gaza, widening natural gas supply disruptions due to a dispute between Russia and Ukraine, and mounting evidence of Opec’s compliance with production cuts.
Although the conflict in Gaza did not directly threaten any oil supplies, Middle East unrest can bolster prices because countries in the region pump about a third of the world’s oil. – (Bloomberg)
