Oil prices scale down by 8% on first day of 2009

Oil prices dropped on the first day of 2009, after spiking by almost 14% on the last trading day of 2008. Release of weekly US data on the last day of 2008 showed a decrease in refinery activity and an unexpected 500,000 barrel rise in crude stocks. 2009 was ushered with an almost 8% fall in prices, partly in reaction to a sharp rally late on Wednesday. London Brent fell to US$42.5, while US light, sweet crude dipped to US$41.76 a barrel. In USA, the rise in refined product inventories was less than expectations, gasoline inventories rose by 800,000 barrels as compared to a forecast of 1.5 mln barrels, and distillates rose by 700,000 barrels versus an expected 1.1 mln barrels. Demand from Asia was feeble, as commercial fuel stocks in China rose to a record high in November, and Indian refinery production fell as compared to last years levels, for the first time in three years. The world cautiously watches a dispute over natural gas supplies between the world number one non-OPEC oil exporter Russia and its neighbors. Halfway through the week, Russia shut off gas to its neighbor Ukraine after a contract dispute, but said it had increased supplies to other European states to try to reassure its premium-paying customers. This could rouse new doubts about Russia's reliability as an energy supplier and fuel suspicions in the West that the Kremlin bullies its pro-Western neighbors. However, similar past disputes rarely had an impact on oil flows.
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