EG: Crude Oil Prices Continue to Fall on Tepid Demand
Crude oil resumed losses on Wednesday after a brief respite the previous day, with both Brent and WTI contracts trading at fresh five-year lows.
Tepid demand and ample supply has driven oil prices to lows not seen since the global recession in 2009, and some are expecting prices to fall further.
"The market is still looking for a bottom and for an excuse to test the "magical" number of $60," said Eugen Weinberg of Commerzbank in Frankfurt. "Everything is sentiment driven and people seem to be only accepting negative headlines right now."
There was more negative news for prices late Tuesday, as the U.S. Energy Information Administration cut its 2015 global demand forecast for oil by 200,000 barrels a day to an average of 92.3 million barrels a day next year, because of weaker global economic growth prospects.
With rising U.S. oil production adding to the current global oil glut, the market will be keenly watching U.S. oil inventory data due later on Wednesday. Higher stock levels could lead to further price declines, analysts say.
"Prices are already at lows that make much of the American production uneconomical," Mr. Weinberg said. "Much of the production is hedged for the next six months but looking beyond, it is clear that producers will reduce their investments."
If oil producers are hurting from cheap oil, the price decline is proving a boon for consumers. The 40% fall in oil prices since the summer will help eurozone growth, analysts at Credit Suisse said in a note, estimating that it should increase growth by around 0.5% next year. The largest boost will come from consumers, the bank said, with the drop in energy prices freeing more than half a percentage point of household discretionary spending.
Emerging markets, most of which are net oil importers, could also benefit from the fall in oil prices. "With lower fuel costs and a stronger economic environment, we particularly like Sri Lanka, Bangladesh and Kenya," Michael Levy at Baring Asset Management in London wrote in a note to clients.
Prices slid again after snapping a five-session losing streak on Tuesday. Brent crude for delivery in January was down $1.15 at $65.69 a barrel on the London-based ICE Futures Europe. In electronic trading on the New York Mercantile Exchange WTI crude futures for January traded up down $1.34 at $62.48.
NYMEX reformulated gasoline blendstock for January, the benchmark gasoline contract, was 2.4% lower at $1.6826 a gallon. ICE gas oil for December changed hands at $595.50 a metric ton, down $8.50 from Tuesday's settlement.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
