Brent falls below $115 on US inventory gain
Singapore, March 30, 2011
Brent fell by 0.3 per cent on Wednesday to below $115 on indications that higher fuel prices were weighing on consumer confidence in top user the US, where crude inventories rose more than expected last week.
Brent crude for May declined 31 cents to $114.85 a barrel at 0323 GMT, still less than $5 from a 2-1/2-year high near $120 reached last month, while US crude fell 46 cents to $104.33.
A prevailing mood of malaise in southern Europe also contributed to the price drop, after Standard & Poor's downgraded the credit ratings of Greece and Portugal, while in Libya, Muammar Gaddafi's forces contained the rebels' advance.
"Underpinning the strength in the oil price is what is happening in the Middle East and North Africa, adding a $15 to $20 premium," said Ben Le Brun, a CMC Markets analyst in Sydney.
"But there is a lot of stockpile in America. The price of gas is curtailing the economy and damaging consumer confidence, and with what we are seeing in the euro-zone, these are all headwinds for oil.”
Crude inventories in the US last week rose 5.7 million barrels, more than three times the expected gain, industry group the American Petroleum Institute said on Tuesday, while gasoline stockpiles fell in line with forecasts and distillates including gas oil and diesel fell less than expected.
Government data on the nation's oil inventories and demand will follow on Wednesday from the Energy Information Administration.
US consumers turned gloomy in March as rising energy prices ignited fears of inflation, a change in mood that could dent economic growth. Another report on Tuesday showed US home prices fell for a seventh straight month in January.
Retail gasoline demand fell last week for a fourth consecutive week compared with year-ago levels because of higher prices, which averaged $3.56 a gallon, 27 per cent higher than a year earlier, MasterCard Advisors' SpendingPulse report showed on Tuesday.
In Germany, worries about the global economy and inflation drove down consumer sentiment for the first time in 10 months.
Credit rating downgrades by S&P left Portugal's rating one notch above junk and Greece's creditworthiness below that of Egypt.
In Libya, Muammar Gaddafi's better armed and organised troops reversed the rapid westward advance of rebels on Tuesday as world powers meeting in London piled pressure on the Libyan leader to step down.
Earlier this week, oil prices had also dropped amid expectations that a rapid resolution to Libya's civil war would allow for a quick restart of exports, which virtually vanished from about 1.3 million barrels per day (bpd) before the conflict started.
A conference of 40 governments and international bodies agreed to press on with a Nato-led aerial bombardment of Libyan forces until Gaddafi complied with a UN resolution to end violence against civilians. – Reuters