Middle-east Arab News Opinion | Asharq Al-awsat

Oil at 3-Month Low on Weak U.S. Economic Outlook - ASHARQ AL-AWSAT English Archive
Select Page

SINGAPORE (Reuters) – Oil fell to a three-month low on Wednesday, as lingering worries of a weak U.S. economy continued to weigh on demand, but conflicts in Nigeria and dispute over Iran’s nuclear plan could counter the bearish effects.

U.S. light crude fell by more than $1.00 to reach $118.10 a barrel, its lowest since May 5, before recovering to $118.63, down 54 cents at 1:47 a.m. EDT.

This represents a drop of nearly 20 percent from mid-July’s record high at more than $147.

London Brent crude shed 50 cents to $117.20 a barrel.

As oil prices plunged, the dollar climbed to seven-week peaks against the euro and a major currency basket on Tuesday.

“Western countries are struggling with high inflation,” said Gerard Rigby of Fuel First Consulting in Sydney. Such a battle would tend to put the brakes on consumer spending.

In the United States, Tropical Storm Edouard, the fifth of the 2008 Atlantic hurricane season, hit the Texas coast without causing any major disruptions to U.S. energy operations, which also helped to squash concerns and bring prices down.

The storm caused minor oil and natural gas outages as it passed through the U.S. Gulf of Mexico, and companies began to fly evacuated staff back to rigs.

Expectations of rising supplies in the United States weighed on sentiment.

A Reuters poll of analysts forecast U.S. government weekly inventory data to be released on Wednesday to show a 300,000-barrel rise in crude inventories, a 2.1 million-barrel increase in distillates, and a 1.2 million barrel draw in gasoline stocks.

“Prices will remain on the downward trend but I don’t think they will fall that much, but be rangebound around $118-$120 a barrel,” Rigby said.

This was because geopolitics, which continued to pose a threat to oil supplies, and demand in India and China, could counter the bearish impact, he added.

New supply fears have also emerged after a blast on the Baku-Tbilisi-Ceyhan pipeline on Tuesday night in eastern Turkey, prompting authorities to halt oil flows along the pipeline, whose capacity was set to rise to 1.2 million barrels per day (bpd) this year, state-run Anatolian news agency said.

Iran, the world’s fourth-largest oil producer, delivered a letter to world powers on Tuesday but gave no concrete reply to a demand to freeze its nuclear activity, a defiant step the United States has warned could lead to more sanctions.

Tehran says it is only seeking to master nuclear technology to generate electricity and has repeatedly refused to halt its atomic work, prompting the U.N. Security Council to impose three rounds of penalties on Iran since 2006.

In Nigeria, the world’s eighth-largest oil exporter, militant attacks and security concerns in the Niger Delta were causing the country to lose an average of 650,000 barrels of crude production per day.

The Paris-based International Energy Agency says consumption, which remains strong in emerging countries, will push oil demand higher this year, despite the global slowdown, leaving supplies as its main worry.

“Our biggest worries are Nigeria, the hurricane season, etc … We cannot relax too much. There is very robust demand in China, India and the Middle East,” Nobuo Tanaka, executive director of the IEA, adviser to 27 industrialized countries, told Reuters on Tuesday.

The IEA expects oil demand to grow this year by 890,000 barrels per day, its latest monthly oil report shows.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

More Posts

Follow Me:
FacebookGoogle PlusYouTube