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03 March 2024

Oil prices retreat in Asia after closing above $100 a barrel

By Agencies

Oil prices retreated on Wednesday in Asia after closing above $100 (Dh367) a barrel for the first time overnight as investors seized on a refinery explosion and the possibility that Opec may cut its output.


The spike in crude on Tuesday rattled Asian financial markets, with Tokyo’s benchmark stock index falling more than 3 per cent.


Many recent forecasts have said oil demand growth this year will be less than initially expected – yet prices continue to rise. That suggests oil may continue rising as the weakening dollar attracts new investors to the futures market.


Other factors lifting oil above the $100 mark were concerns about a falling dollar, the threat of new violence in Nigeria and continuing tensions between the US and Venezuela.


“The oil price continues to be supported by concerns over oil supply,” said David Moore, Commonwealth Bank commodity strategist, in a daily research note. “There is speculation that Opec will either leave oil production levels unchanged, or, possibly, even reduce production following the March 5 Opec meeting,” he said.


Light, sweet crude for March delivery fell 71 cents to $99.30 (Dh364) a barrel in Asian electronic trading on the New York Mercantile Exchange by mid-afternoon in Singapore.


The contract rose $4.51 (Dh16.55) on Tuesday to settle at a record finish of $100.01 a barrel, after earlier rising to a trading record of $100.10 a barrel. It was the first time since January 3 that oil had been above $100.


Prices are still within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 (Dh139.46) a barrel then would be worth $96 (Dh352.32) to $103 (Dh378) or more on Wednesday.


The rise spooked global equity markets amid worries that high oil prices will further crimp consumer demand, one of the primary drivers of the US economy. In addition to declines in Tokyo, Hong Kong’s Hang Seng stock index was down more than 2 per cent in afternoon trading. On Tuesday, the Dow Jones industrial average closed 0.1 per cent lower, erasing early gains.


Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.


Gasoline and heating oil prices appeared to lead Tuesday’s wide advance in energy prices due to the explosion Monday at Alon USA’s Big Spring, Texas, refinery. The 67,000-barrel-a-day facility could be shuttered for two months, the company has said.


During Tuesday’s Nymex floor session, March gasoline jumped 10.93 cents to settle at a record $2.6031 (Dh9.55) a gallon (3.8 liters), and March heating oil rose 11.45 cents to settle at $2.7614 (Dh10.13) a gallon, also a record. Like crude, both retreated in after-hours trading.


A threat by a rebel group in Nigeria to escalate attacks on the nation’s crude oil infrastructure helped boost oil prices overnight. The rebels were acting in response to rumors that the government had killed a captured leader, whom authorities later said was safe and well. Militant attacks have cut about 20 per cent of Nigeria’s crude output in recent years.


Traders are also focused on the Organization of Petroleum Exporting Countries, which will meet early next month to map out production plans, and Venezuela, where President Hugo Chavez made conflicting statements this weekend about the country’s legal dispute with Exxon Mobil Corp.


The world’s largest oil company is fighting Venezuela’s nationalisation of an oil project, and recently convinced several courts to freeze $12 billion (Dh44 billion) in Venezuelan oil assets.


In London, April Brent crude fell 75 cents to $97.81 (Dh358.96) a barrel on the ICE Futures exchange.


Heating oil futures fell 1.94 cents from their Tuesday record to $2.74220 (Dh10.06) a gallon. Gasoline prices also dropped 1.94 cents, to $2.5837 (Dh9.48) a gallon. Natural gas futures gained 6.7 cents to $9.044 (Dh33.19) per 1,000 cubic feet. (AP)