Singapore: Brent crude erased losses on Thursday as the dollar weakened, while a bigger-than-expected increase in US crude stockpiles heightened concern that demand may slow and doubts over the euro zone rescue fund continued to weigh on confidence.
Europe’s debt crisis has deepened oil’s correlation with equities, while the dollar’s haven appeal is driving investors away from commodities. A brief return of risk appetite early on Thursday drove prices from losses to modest gains as the dollar index weakened by about 0.2%.
Brent rose as much as 34 cents to $104.15 a barrel and was trading at $104 at 11:00 am, after earlier touching a trough at $103. It is poised for a monthly drop of almost 9% and a decline of about 8% this quarter.
US crude gained 10 cents to $81.31 a barrel. Futures have fallen about 15% this quarter, the worst drop since the last quarter of 2008.
“A lot has been talked about but no agreement is in place for the euro zone,” said Alvin Liew, a senior economist at UOB Research in Singapore. “The uncertainty is out there.”
US crude oil stocks climbed more than forecast last week as imports rose and refinery activity slowed, US Energy Information Administration data showed on Wednesday.
Crude inventories in the world’s largest consumer of oil increased 1.92 million barrels to 340.96 million in the week to 23 September. Analysts polled by Reuters had projected an 800,000-barrel build, on average.
Imports rose 1.35 million barrels a day to 9.67 million, according to the report.
Refinery utilisation fell 0.5 percentage point to 87.8% of capacity.
Euro Zone Debt
Investors are eyeing the result of European Union and International Monetary Fund inspectors’ visit to Greece to decide whether Athens has done enough to secure a new batch of funds while German chancellor Angela Merkel worked to defuse a revolt within her government before a vote on Thursday to enhance the powers of Europe’s bailout fund.
The decline in oil was also mirrored in commodities from copper and grains, to equity markets. The MSCI Asia ex-Japan was down 0.8%.
Asian shares and commodities fell on Thursday on growing worries that Europe’s intractable debt problems will plunge the world into a second global financial crisis.
Brent oil has resumed a medium-term downtrend, towards a range of $98.74 to $100 per barrel, according to Reuters technical analyst, Wang Tao.
