Brent oil relieves more on U.S. stock make and slow global growth
Brent crude oil dropped a little more on Wednesday as increased U.S. crude stockpiles and a weak World Bank expansion estimate combined to keep prices close to the near-six year lows touched in the earlier session.
Energy Information Administration statistics showed U.S. crude stocks increased by 5.4 million barrels in the previous week, far more than analysts’ prospects for an increase of 417,000 barrels, pointing to continued oversupply in the market.
“It is a directly bearish report with huge across-the-board inventory builds,” said John Kilduff, a partner with Again Capital LLC, New York.
“At this position, the bar has been raised in terms of engendering the next leg lower for prices.”
February Brent crude dropped by 10 cents to trade at $46.49 a barrel by 1620 GMT, while West Texas Intermediate crude for February rose by 15 cents to $46.04.
The World Bank subordinates its 2015 and 2016 world economic growth forecasts on Tuesday, reinforcing worries about sluggish expansion in energy demand.
Oil prices that have dropped by about 60 percent since June are wreaking havoc on economies that depend on commodities exports. Russian Finance Minister Anton Siluanov called for a 10 percent spending cut on everything but defense on Wednesday.
At the same time, Europe is on shaky ground even though the European Central Bank’s bond-buying stimulus plans.
“The global economy is running on a single engine … the American one,” the World Bank’s chief economist, Kaushik Basu, said. “This does not make for a bright outlook for the world.”
Market analysts said oil prices would remain weak because of oversupply, prompting cuts to price forecasts for 2015 and 2016.
Oil had fell nearly 5 percent on Tuesday before closing down 1.8 percent, with global benchmark Brent temporarily trading at par with U.S. prices for the first time in three months as some traders enthused to take advantage of sufficient U.S. storage space.
The U.S. shale oil boom and stable OPEC production have produced a global supply glut. U.S.-based PIRA Energy Group said American stocks could be moving 80 percent of capacity by the spring, in a report published before the EIA’s data release.
Outside the United States, some of the world’s largest oil traders have reserves supertankers to store at least 25 million barrels at sea.
“OPEC is not going to appear to the rescue of the market,” said Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas. “The onus is on floating storage.”
Producer club OPEC has shown no sign of changing strategy since it decided late last year to maintain output despite slowing Asian and European economic growth.