Oil prices slumped more than 2 percent on Thursday as an unexpected rise in US crude inventories and worries of more monetary tightening in China to curb inflation in the face of robust growth data. The steep drop in prices came as investors also liquidated positions on the expiring front-month US February crude contract, outweighing upbeat US economic data on jobs and housing.
Crude fell along with a sell-off in a broad array of commodities and equities globally as investors feared more tighter money policies in China to rein in inflation. The Reuters-Jefferies CRB index, a global commodities benchmark, fell more than 1 percent and was headed for its largest one-day loss in over two weeks.
By 12:35 pm EST (1735 GMT), US February crude fell $2.13 to $88.73 a barrel, down for the third day in a row, after having hit a session low of $88 earlier, the lowest since January 7. The contract expires at the close of the session. US March crude dropped $2.07 to $89.74.
In London, March Brent crude dipped $1.40 to $96.76, falling for the fist time in three days, with the session low hitting $95.43, the lowest since January 11. US crude oil stockpiles rose 2.62 million barrels in the week to January 14, defying forecasts for a 400,000 barrel drawdown, data from the US Energy Information Administration showed.
The stockbuild, the first in seven weeks, jolted analysts who had expected that the disruption of domestic production due to the shutdown of the Trans Alaska Pipeline that moves oil from Alaska to the West Coast could have reduced total inventories significantly. "The Alaska pipeline was not down long enough to have a drastic impact on the crude supplies," said Bill O'Grady, chief investment strategist at Confluence Investment Management in St. Louis, Missouri.
The pipeline, which normally moves 12 percent of US crude production, was back in operation on Monday as producers also restarted, after a bypass repair to circumvent a leak discovered January 8. It was expected to ramp up to normal rates of about 630,000 barrels per day by early next week. China's fourth quarter gross domestic product rose above forecasts, rising to 9.8 percent against expectations for a slowdown to 9.2 percent.
That raised new worries about China's explosive growth. Potential measures to slow Chinese growth resulting in a hard landing for investors is one of the major worries analysts had cited heading into 2011. But not everyone is convinced Chinese attempts to curb inflation will result in lower oil prices.
"We wonder if the increasing inflationary pressure in China can be curbed. At present, China is the world's fastest growing economy and even if the government is trying to curb the inflation, we doubt that it will succeed fully," said the research team at Global Risk Management in a report, hiking their oil price forecast for 2011-12.
Comments
Comments are closed.