Oil falls below $39, reversing big gain overnight | business | Hindustan Times
Today in New Delhi, India
Dec 05, 2016-Monday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

Oil falls below $39, reversing big gain overnight

business Updated: Feb 20, 2009 23:53 IST
Highlight Story

Oil prices fell below $39 a barrel on Friday in Asia as investor concerns about weak crude demand lingered after lower-than-expected inventory numbers sparked a big gain overnight. Light, sweet crude for March delivery fell 63 cents to $38.85 a barrel by midday in Singapore on the New York Mercantile Exchange. The contract on Thursday surged $4.86, or 14 percent, to settle at $39.48.

Most trading volume was with the April contract, which fell 68 cents to $39.50 after jumping $2.77 to settle at $40.18. The jump in prices on Thursday was fueled by an Energy Information Administration report that showed crude stocks decreased 200,000 barrels for the week ended on Friday.

Analysts had expected stocks to grow by 3.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos. Inventories have risen more than 30 million barrels in the prior six weeks.

The report's four-week moving average showed that gasoline consumption rose 0.8 per cent.

But investors were skeptical of a sustained recovery in crude demand.

"It was a significant move last night, but there's not much out there that can create a bullish story," said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. "The demand outlook is very weak, and there's nothing to suggest that it will improve in the near term."

Some evidence from Thursday suggested demand remained weak. The Department of Transportation said Thursday that motorists drove 3.8 billion fewer miles in December than they did a year earlier. The 1.6 percent decline in driving marks the 14th consecutive month of declining driving with the decline totaling 115 billion miles. Rising U.S. joblessness continues to drag on demand amid the worst recession in decades. The Labor Department said Thursday that the number of unemployed workers receiving unemployment benefits jumped to an all-time high near 5 million, while new jobless claims remain well above 600,000.

Crude investors look to stock markets for sense of overall sentiment on the economy, and the Dow Jones industrial average fell to a six-year low Thursday, sliding 1.2 percent. Most Asia stock index also fell at the open on Friday.

The Organization of Petroleum Exporting Countries has pledged to cut 4.2 million barrels a day since September, and the group's leaders have said recently they may reduce output more at a meeting on March 15.

Investors have so far brushed off OPEC supply cuts, sending prices down about 73 percent from a record 147.27 in July. "What OPEC is encountering is a very significant drop in demand in the last six months," Hassall said. "Another big cut might support prices, but they're mindful that they don't want a surge in prices to slowdown a recovery."

In other Nymex trading, gasoline futures fell 2.36 cent to $1.08 a gallon. Heating oil dropped 1.83 cents to $1.19 a gallon, while natural gas for March delivery was steady at $4.08 per 1,000 cubic feet.

In London, the March Brent contract fell 48 cents to $41.51 on the ICE Futures exchange.