Oil prices slip as US crude inventories jump

5th January 2012, Comments 0 comments

World oil prices eased Thursday on signs of weaker-than-expected energy demand in the United States and as the market tracked the stronger dollar, falling global equities and eurozone crisis fears.

Traders also took profits one day after prices spiked close to eight-month highs on the back of simmering tensions between the West and key crude producer Iran.

In London late afternoon deals, Brent North Sea oil for delivery in February dropped 10 to $113.60 per barrel.

New York's main contract, West Texas Intermediate (WTI) for delivery in February, dipped 52 cents to $102.70.

The US Department of Energy (DoE) said Thursday that US crude oil reserves jumped 2.2 million barrels in the week ending December 30.

That confounded market expectations for a drop of 900,000 barrels, according to analysts polled by Dow Jones Newswires, and indicated weaker energy demand in the world's biggest oil-consuming nation.

"This week's reported data represents the last week of 2011. On average, this week normally sees a large crude and distillate stock draw while on average gasoline stocks build," said DNB Markets analyst Torbjorn Kjus.

"Crude stocks did not draw at all (last week) but built instead 2.2 million barrels on the back of continued surprisingly high imports."

He added: "It is not very strange that the market took the data negatively immediately after the release."

Stockpiles of distillates, which include diesel and heating fuel, jumped 3.2 million barrels, compared with forecasts for a smaller 600,000-barrel gain.

Distillates are a key focus for traders during the northern hemisphere winter, when demand for heating fuel hits a peak.

The DoE added that gasoline or petrol inventories swelled by almost 2.5 million barrels, which was more than double expectations. The report was published one day later than normal because of the New Year holiday on Monday.

Prices also slipped as traders reacted to fears over the worsening eurozone sovereign debt crisis.

"The dollar has continued to strengthen, weighing on crude oil prices," noted analyst Jack Pollard at the Sucden oil brokerage.

The euro slumped to a 16-month low against the dollar on Thursday and European stock markets fell badly, led down by Spain and Italy as a sharp upsurge in eurozone debt tensions more than offset strong US jobs data.

The European single currency slumped to $1.2780 in afternoon trade, the lowest level since September 13, 2010, and hit 98.48 yen, a level last seen in December 2000.

A stronger US currency makes dollar-priced crude more expensive for buyers using weaker currencies. In turn, that tends to dent demand and prices.

Oil surged close to eight-month peaks on Wednesday as the EU moved closer to an Iran oil embargo and Tehran warned the United States to remove its naval forces from the Gulf.

Stepped-up rhetoric sent shivers through the markets worried that Iran might follow through on threats to disrupt shipping of Gulf oil through the crucial Hormuz Strait. About 20 percent of the world's oil passes through the waterway.

New York's light sweet crude Wednesday rose as high as $103.74 per, a level previously reached on May 11. London Brent oil leapt to $113.97, its highest point since November 14.


© 2012 AFP

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