Crude oil fell below US$42 a barrel in New York after some traders viewed a rally of 14 percent at the end of last year as excessive amid slumping demand.
Fuel consumption in the US, the world’s biggest economy, fell 3.7 percent in the four weeks ended Dec. 26 from a year earlier, the US Department of Energy said. Oil jumped 14 percent on Dec. 31 after a report showed US fuel stockpiles climbed less than expected and the conflict between Israel and Hamas raised concern that Middle Eastern supplies may be disrupted.
“There was an over-reach to the upside,” said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland.
“The extent of the move was more due to low liquidity, and it being the end of the year” than fundamentals, Jakob said.
Crude oil for delivery next month fell as much as US$3.52, or 7.9 percent, to US$41.08 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
It was at US$41.35 a barrel at 9:52am London time.
Oil fell 54 percent last year, the first annual decline since 2001 and the biggest drop since futures trading started in 1983.
The February contract rose US$5.57 to US$44.60 a barrel on Wednesday, the highest since Dec. 12.
“That rally on the 31st didn’t have too much behind it so we’re seeing crude come back to a level more reflective of the fundamentals,” said Toby Hassall, an energies analyst working with Commodity Warrants Australia in Sydney, Australia.
“We still don’t have a clear picture of when a global recovery is going to take place,” Hassall was quoted as saying.
US stocks last year plunged the most since the Great Depression as financial shares collapsed, energy and metal producers tumbled and the economy suffered a year-long recession.
The Standard & Poor’s GSCI Index of 24 commodity futures lost 47 percent last year, the largest decline since its introduction in 1971.
The Reuters/Jefferies CRB Index of 19 raw materials dropped 40 percent, the biggest plunge since 1957.
Crude oil may rise next week as OPEC makes record production cuts to counter the deepest economic slump since World War II.
Seven of 14 analysts surveyed by Bloomberg News, or 50 percent, said futures would gain through Friday.
Five respondents, or 36 percent, forecast oil would fall and two said there would be little change in prices.
Last week, 46 percent of analysts said prices would drop.
Oil had gained 14 percent this week amid turmoil in the Middle East and Europe.
Israel yesterday killed a Hamas leader in its assault on the Gaza Strip and Israeli Foreign Minister Tzipi Livni said her nation would keep pressure on the militant Islamic group.
An army spokesman, speaking anonymously in accordance with regulations, said warplanes hit Hamas leader Nizar Rayyan’s house in the Jabaliya refugee camp.
In Europe, the repeat of an energy standoff between Russia and Ukraine threatened fuel shipments.
Russia prepared to resume talks with Ukraine in their dispute over the price of natural gas after cutting supplies to its western neighbor for the second time in three years.
The EU urged Russia and Ukraine to “rapidly” resolve their dispute and said it counted on assurances gas supplies would continue uninterrupted.
Ukrainian President Viktor Yushchenko said in a statement the two sides were near a compromise, urging state utility NAK Naftogaz Ukrainy and OAO Gazprom, Russia’s gas exporter, to meet again in the next one or two days. Gazprom also proposed talks.
Brent crude oil for settlement next month fell as much as US$3.59, or 7.9 percent, to US$42 a barrel on London’s ICE Futures Europe exchange.
It was at US$42.48 a barrel at 9:14am London time. The contract on Wednesday rose US$5.44, or 14 percent, to settle at US$45.59 a barrel.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to