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18 July 2024

Crude ends three-day slide as Opec rules out output hike

By Agencies



Oil halted a three-day slide to rise above $96 a barrel on Tuesday on expectations of a continuing drop in crude stocks in top consumer the United States and signs Opec will not raise output.

The prospect of rising tensions in Africa’s top exporter Nigeria provided further support. Armed groups in Nigeria’s oil producing south are building up arms and supplies for a major attack on an oil facility in the world’s eighth-largest exporter, militant and security sources said on Tuesday.

US oil rose $1.55 to $96.63 a barrel by 1315 GMT, recouping some of Monday’s three per cent, or $2.82 drop. London Brent crude rose $1.34 to $95.73.

Oil has fallen since prices crossed the $100 mark for the first time last week, weighed down by fears of a recession in the US and more recently by forecasts of warmer weather in the US Northeast, the biggest heating oil market of the nation.

“Offsetting this potentially bearish development is the current very low levels of United States inventories, which will likely prevent prices from sliding too far,” analysts at Barclays Capital said in a research note.

US crude oil stocks were expected to have dipped by 900,000 barrels last week, an eighth consecutive draw, pulling them even further below 300 million barrels, a Reuters poll of analysts ahead of today’s data found. The poll also showed a likely 300,000-barrel gain in distillate supplies, and a 2.1 million-barrel petrol build.

Oil received some support after an Opec delegate said the group of oil exporters was unlikely to change its output policy at the upcoming meeting on February 1 if prices stayed close to their current level.

“If the price stays at this level, I don’t think they will do anything,” the delegate said. “Ministers at the meeting will be looking at the second quarter when demand declines seasonally.”

Oil took a knock after a US report last week showed the nation’s unemployment rate rose to five per cent in December, its highest in more than two years.

“The biggest concern in the market now is the possibility of a recession in the US,” said Tony Nunan, a manager at Mitsubishi Corp’s risk management unit. “Right now, there seems to be a 50-50 chance that it would happen and even if it doesn’t, the fear that it might is enough to spook the market.” (Reuters)