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22 May 2024

Oil extends retreat on US economic worries

By Agencies



Oil fell on Monday, extending the previous session's decline, as the market mulled over gloomy US economic data and the impact on demand should the world's top energy consumer slip into recession later this year.

US light crude for February delivery fell 49 cents to $97.42 a barrel by 0049 GMT, extending Friday's $1.27 fall which brought oil to settle at $97.91.

The market hit a record high of $100.09 a barrel last Thursday following US data showing a decline in the country's crude stockpiles.

London Brent crude fell 37 cents to $96.42 on Monday.

Oil's fall on Friday came after a government report showed the US unemployment rate rose to 5 per cent in December, its highest in more than two years. The bleak unemployment report was the latest signal that top energy consumer the US could fall into a recession later this year.

Recession worries in the US also dragged down Asian equities markets, with Australian shares falling 2.5 per cent and Japan's Nikkei average opening 1 per cent lower.

"Concerns about the US economy are clearly putting some pressure on oil prices. Some market players are also using this opportunity to take profits," said Gerard Burg, a resource analyst from the National Bank of Australia.

Burg said while Opec rumblings over the weekend had not given any clear signal on what action the cartel might take at its next meeting, there were growing expectations that the group would increase output to rein in prices.

Saudi Oil Minister Ali Al Naimi said on Sunday that the rise in oil prices had been determined by market forces, but declined further comment on what action the Organisation of Petroleum Exporting Countries (Opec) would take at its next meeting on February 1 in Vienna.

Separately, Opec president Chakib Khelil said on Saturday he expected oil prices to keep rising during the first quarter of this year before stabilising in the following quarter.

Khelil also said Opec's next meeting would closely study forecasts for world economic growth, particularly those of the US, which has been seriously hit by the sub-prime mortgage crisis.

Opec, which agreed at its last meeting in December to keep output unchanged, has said that exporters could do little to tame oil prices and that world markets are well-supplied.

However the cartel last month pumped beyond the rate targeted in a pact to boost output, led by a rebound in supply from the UAE, a Reuters survey showed on Friday.

Opec's 10 members bound by output targets -- which excludes Iraq, Angola and Ecuador -- pumped 27.39 million barrels per day (bpd), up 410,000 bpd from November.

Separately, crude speculators on the New York Mercantile Exchange boosted net long positions to a near two-month high in the week ended December 24, the Commodity Futures Trading Commission said on Friday.

The increase in bullish sentiment came just before oil prices hit last week's peaks. (Reuters)