Sat, Jan 03, 2009 - Page 11 News List

Oil slides as traders view gains as excessive

SHORT-TERM GAINS Lower-than-expected inventories in the US and fears supplies could be cut because of conflict in the Middle East led to a 14 percent gain last week

BLOOMBERG

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.

This story has been viewed 1626 times.
TOP top