Oil prices extend losses in Asia after inventory report
SINGAPORE: Oil prices extended losses in Asia on Thursday after rising US stockpiles reinforced fears of a prolonged global glut, while the dollar strengthened after the Federal Reserve hiked interest rates.
The commodity suffered fresh selling pressure on Wednesday after a report from the US Department of Energy showed that crude supplies rose 4.8 million barrels in the week ending December 11.
US benchmark West Texas Intermediate for January delivery fell to $35.52 a barrel on the New York Mercantile Exchange, its lowest closing price since February 2009.
After a brief recovery in early Asian trade on Thursday, it fell again and was trading eight cents down at $35.44 at 0700 GMT.
European benchmark Brent crude for February, a new contract, was down 15 cents at $37.24.
Prices have tumbled since December 4, when the OPEC oil exporters’ group refused to set a production limit despite a supply glut, anaemic demand and a slowing global economy.
“US crude production shows no signs of faltering despite the low crude oil prices. We continue to wait patiently for production to drop. However, it is taking painfully long,” Daniel Ang, an investment analyst at Phillip Futures in Singapore said of the US stockpile figures.
The Fed’s widely expected decision to lift interest rates for the first time since 2006 also weighed, with the dollar ticking up against most rivals, making oil more expensive to customers using weaker currencies.
“We would have thought that with the highly anticipated rate hike, the market would have priced this in,” said Ang.
However, the US central bank’s boss Janet Yellen said she had been surprised by “the further downward movement in oil prices” and expected them to stabilise before edging up.
Analysts said there was some price support after US lawmakers’ agreement to pass a bill lifting a four-decade ban on oil exports as part of a massive government spending overhaul.
Crude exports were banned in 1975 as prices skyrocketed in the wake of the Arab oil embargo. “A lifting of the export ban could narrow the spread between WTI and Brent, by providing the international market with a substitute for oil from current main supplying regions,” said Sanjeev Gupta, head of the Asia-Pacific Oil and Gas practice at professional services organisation EY.