Singapore | Oil prices tumbled in Asia Thursday after US commercial crude stockpiles climbed to a record level, further stoking worries about a global oversupply of the commodity. Prices had closed higher over the past two trading days, buoyed by hopes that planned economic stimulus measures in the eurozone and Japan will bolster demand, but analysts said any rally is unlikely to be supported because of the supply glut.
The US Department of Energy reported Wednesday that the country’s commercial crude inventories jumped 8.4 million barrels to 494.9 million in the week to January 22, the highest on record. Rising inventories typically signals weak demand in the world’s top oil consuming nation and puts further downward pressure on prices in a saturated market. We remain slightly sceptical of further increases with the current weak fundamentals, Phillip Futures analyst Daniel Ang said in a market commentary.
By 0315 GMT, US benchmark West Texas Intermediate for delivery in March was down 41 cents, or 1.27 percent, at USD 31.89 and Brent crude for March fell 33 cents, 1.0 per cent, to USD 32.77 a barrel. A slight weakening in the greenback after the US Federal Reserve left interest rates unchanged Wednesday could have limited the decline, Ang said, adding that the support should not last for long.
While leaving rates unchanged at this week’s meeting bank policymakers left the door open for more hikes this year despite the economic uncertainty roiling markets. The Fed raised rates for the first time in almost a decade in December. The Fed certainly didn’t rule out a March rate hike completely. Singapore’s United Overseas Bank said it expects the Fed to hike at a slow, gradual pace this year. Higher US interest rates are a boost to the dollar, making dollar-priced oil more expensive to holders of weaker units, dampening demand and hurting prices.
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