Oil falls towards $53 on weak demand, equity slide
SINGAPORE – Oil fell on Wednesday on further signs of easing demand in the world’s top consumers, and as equities ebbed on fading optimism about a U.S. bank rescue plan.
Data showed rising crude stocks in the United States and a fall in crude imports in Japan, the world’s biggest and third-biggest oil users respectively.
U.S. light crude for May delivery fell 71 cents to $53.27 a barrel by 0223 GMT, after touching a near three-month high above $54 on Tuesday.
London Brent crude fell 46 cents to $53.04.
“The market’s getting ahead of itself. It looked like there was light at the end of the tunnel in this recession when the U.S. government announced plans to buy the toxic assets,” said Tony Nunan, risk manager at Tokyo-based Mitsubishi Corp.
The optimism generated after the U.S. government unveiled plans to clean up bank balance sheets seemed to fade, with U.S. stock markets slipping on Tuesday and Asian stock markets following on Wednesday.
The dollar edged up against the euro after rising the previous day on the U.S. plans, adding pressure to dollar-denominated commodities such as oil.
The unfolding economic crisis is hammering demand for oil, and this is reflected in the latest data.
The American Petroleum Institute said on Tuesday that commercial crude oil inventories rose by a bigger-than-expected by 4.6 million barrels last week, and a Reuters poll of analysts forecasts the more closely followed Energy Information Administration numbers later on Wednesday to also show a crude build.
Energy demand in the United States has been hard-hit by the economic meltdown, buffering inventory levels, and global consumption has been shrinking for the first time in a quarter century, bringing oil prices to below $33 last December.
Other major consumers are also feeling the pinch, with Japan’s crude oil imports falling to their lowest for the month of February in 20 years.
But Nunan said it is a positive sign that crude, which is up more than 50 percent since the middle of last month, has been able to hold onto most its gains in the face of the evidence of weak demand.
“Even with the API report on the stockbuild, prices didn’t come off that much. It seems like the market has consolidated above $50,” said Mitsubishi’s Nunan.
“It’s going to be hard to get the market up from here, but at least people are feeling that the bottom has been put into the oil market,” he said.