OIL prices wallowed near US$40 (S$60) a barrel as rising crude inventories and poor corporate results suggested the worst US recession in decades could be deepening.
Light, sweet crude for March delivery fell 9 cents to US$40.23 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract overnight dropped 46 cents to settle at US$40.32.
Fourth quarter US corporate earnings have mostly been dismal, and more companies reported on Wednesday that plunging consumer demand is hurting their profits.
Kraft Foods Inc said fourth-quarter profit dropped 72 per cent and Time Warner Inc. reported a loss of US$16 billion. Costco Wholesale Corp said its earnings for the quarter will 'substantially' miss Wall Street estimates due to poor sales while Eastman Kodak Co is bracing for a 12 per cent to 18 per cent slump in sales this year.
'There are a lot of companies struggling everywhere you look,' said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. 'That follows through to consumer demand for energy products.' US crude inventories have soared over the last month or so, as massive layoffs undermine demand for gasoline.
Oil inventories jumped 7.2 million barrels from the previous week to 346.1 million, according to an Energy Information Administration report on Wednesday. Crude supplies are running at a surplus of 50.3 million barrels from the same period last year.
'The inventory numbers are quite a negative sign,' said Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore. 'Demand is extremely weak.' Opec output cuts have helped bolster prices, keeping them above a five-year low of US$33 a barrel in December. The Organisation of Petroleum Exporting Countries has promised to reduce output by 4.2 million barrels since September, and the group's leaders have said the cartel could announce more production cuts at its next meeting in March.
In other Nymex trading, gasoline futures rose 0.28 cent to US$1.22 a gallon. Heating oil was steady at US$1.33 a gallon while natural gas for March delivery rose 4.8 cents to US$4.65 per 1,000 cubic feet. In London, the March Brent contract rose 26 cents to US$44.41 on the ICE Futures exchange. -- AP
