Oil prices sink by over one dollar per barrel

14-Apr-05

U.S. oil inventories have shown an increase for the ninth consecutive week and stand 8.7% above last years levels. The U.S. Department of Energy said that the nation's supply of crude oil grew last week by 3.6 million barrels to 320.7 million barrels. Data released by the US government indicated crude oil and gasoline supplies on the rise, causing oil prices to drop by more than a dollar per barrel on Wednesday. Light, sweet crude for May delivery fell to US$50.35 a barrel in New York, and Brent crude was down to US$50.83 a barrel in London. Nymex crude futures have fallen by nearly 14% since they peaked last Monday in intraday trading at US$58 a barrel. An increase in supply and signs of receding demand growth are indications that a downward pressure will be exerted on the market for the rest of the quarter. IEA suggested that rising U.S. interest rates and energy costs would reduce global demand growth for oil this year by 50,000 bpd to 1.77 million bpd. Slowing Chinese oil demand growth might dampen crude prices further. Will oil prices fall below US$50? – The answer seems negative, because of rising demand in the United States and China, and because of the world's limited excess production capacity, which leaves the oil market more vulnerable than usual to supply disruptions. Demand still seems to be growing and global supply bolster seems to be remains sheer, providing "psychological support" in the market for prices to hover around US$50 a barrel.