FX:Crude oil drops on reserve release talk, global demand fears
Forexpros - Crude oil futures were under pressure for a third day on Thursday, trading close to a one-week low as ongoing speculation Western nations were considering the release of supplies from emergency reserves and fears over a slowdown in global demand weighed.
On the New York Mercantile Exchange, light sweet crude futures for delivery in May traded at USD105.06 a barrel during European morning trade, shedding 0.33%.
It earlier fell by as much as 0.35% to trade at a session low USD105.04 a barrel, just above Wednesday’s one-week low of USD104.67.
Crude prices extended losses from the previous session after French Prime Minister François Fillon said earlier that the outlook for an agreement between the U.S. and European countries to release oil stockpiles in an effort to lower oil prices is positive.
His comments come a day after French media reported that the French government supported the release of oil from its strategic reserves and was waiting for recommendations from the International Energy Agency before moving ahead.
France's Energy Minister Eric Besson told journalists the U.S. had asked France to join it in a possible emergency inventory release. Such a release could happen "in a matter of weeks," French newspaper Le Monde said on Wednesday, citing presidential sources.
Last week, reports surfaced that France and other industrialized nations were considering a release from strategic stockpiles.
U.S. President Barack Obama discussed releasing emergency oil supplies with U.K. Prime Minister David Cameron on March 14 but the leaders reached no agreement.
Though the report was denied by U.S. officials, it has still added a new dimension to the recent price increases, putting investors on watch for any government intervention.
Meanwhile, ongoing concerns over the global growth outlook and its implications on a slowdown in global demand also weighed.
A U.S. government report showed Wednesday that U.S. oil supplies rose by a massive 7.1 million barrels, bringing total inventories to a seven-month high of 353.4 million.
Investors are also concerned about recent signs of a slowdown in China. The U.S. and China are the world’s two largest oil consuming nations.
Meanwhile, oil traders continued to monitor lingering tensions between Iran and Western powers and a potential disruption to supplies from the Islamic Republic.
Iran’s Foreign Minister Ali Akbar Salehi said Wednesday that renewed nuclear talks between Iran and six world powers are expected to take place on April 13. The six world powers include, the U.S., the U.K., France, Germany, Russia and China. A venue for the talks will be finalized in the coming days.
U.S. President Barack Obama said Sunday that there is still time to resolve the dispute over Iran diplomatically, but that the window is closing.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for May delivery was flat to trade at 124.15 a barrel, with the spread between the Brent and crude contracts standing at USD19.09.
Brent prices rallied almost 15% since the start of 2012, as prices have been boosted by supply disruption fears in Iran, South Sudan and the North Sea.
Deutsche Bank estimated that supply of about 2 million barrels per day has been disrupted, with the loss of 800,000 to 1 million barrels per day from Iranian exports.
