LONDON — Brent crude oil steadied at about $107 a barrel on Thursday, a day after its biggest fall in five months on signs of faltering economic growth and rising stocks of fuel.
Oil fell more than 3% on Wednesday following a disappointing US jobs report and a sharp spike in US oil inventories to their highest level since 1990.
Commodities have underperformed other assets for several years and many big investors have begun to reduce holdings of oil, metals and other raw materials. So far this year the S&P GSCI index of oil and commodities is down 2.5% but the Standard & Poor’s 500 index is up almost 9%.
"Investors are shifting out of oil and commodities and into equities after poor returns," said Eugen Weinberg, head of commodities research at Germany’s Commerzbank.
Brent futures for May delivery rose 18c to $107.29 a barrel by 9.05am GMT, not far above this year’s low of $106.78 hit on Wednesday. Brent fell $3.58 on Wednesday, its biggest one-day fall since early November.
US crude was unchanged at $94.45 a barrel, after also shedding almost 3% in the previous session.
Gold also fell sharply with spot bullion down 1% at one point to a 10-month low of $1,541.14 an ounce.
After early signs of stabilisation in the world economy, the last month has seen a series of setbacks with US and European recovery stuttering.
Cyprus narrowly escaped financial meltdown and eurozone economic sentiment has tumbled, with surveys showing manufacturing across Europe slipping deeper into decline.
Lower economic growth brings less demand for fuel.
US crude oil stocks rose by 2.71-million barrels in the week to March 29, compared with analysts’ expectations for a rise of 2.2-million barrels, data showed on Thursday.
US crude inventories now total more than 388-million barrels, close to the record peak of 391.9-million barrels hit in 1982.
"There is now no shortage of oil in the US or anywhere else. This is very clear. And we can see that the economic recovery is also not as good as we thought it was," Newedge commodity sales manager Ken Hasegawa said. "We see more downside pressure on oil prices."
Geopolitical tension
Markets awaited key US jobs data on Friday for clues to the health of the world’s largest economy and indications on its appetite for oil.
According to a Reuters technical analysis, US crude is expected to extend its losses to $93.57 a barrel, while Brent is seen dipping towards $105.66 a barrel.
Brent’s premium to US crude was just below $13 a barrel. The spread hit a one-week high of $14.66 on Tuesday amid concern that a prolonged Exxon pipeline outage in the US Midwest could lead to a build-up in stockpiles near the delivery point of the US benchmark contract in Cushing, Oklahoma.
However, oil prices may draw support from geopolitical tension and supply concern stemming from the standoff between Iran and the West over Tehran’s disputed nuclear programme.
Talks between Iran and six major world powers on Tehran’s nuclear programme are set for Friday and Saturday in Almaty, Kazakhstan.
Investors also kept a close eye on the Korean peninsula, after the US said it was sending a missile defence system to the Pacific island of Guam to defend it from any attack from North Korea.
The announcement came just hours before North Korea’s army said it had ratified an attack against the US, potentially involving a nuclear strike, the latest in a series of provocations testing President Barack Obama’s policy of "strategic patience" with Pyongyang.
