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U.S. Oil Falls Toward $36 on Demand Concerns | ASHARQ AL-AWSAT English Archive 2005 -2017
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SINGAPORE (Reuters) – U.S. oil prices fell toward $36 a barrel on Tuesday as bleak economic indicators in Asia returned focus to the worldwide oil demand slump.

Following Monday’s news that Japan’s economy shrank by the most in 35 years, a Reuters poll showed confidence among manufacturers remained mired near record lows and service sector sentiment fell to its poorest ever.

“Concerns over weak oil consumption continue to weigh on the oil price,” David Moore, a commodities analyst at Commonwealth Bank of Australia, said in a note.

U.S. light crude fell to $36.60 a barrel by 0753 GMT (2:53 a.m. EST), 91 cents off last Friday’s settlement and slightly below late European trading a day ago.

The New York Mercantile Exchange did not print a settlement price on Monday as its trading floor was closed for Presidents’ Day, although electronic trading continued as usual. The floor will reopen later on Tuesday.

Ahead of the March contract’s expiry on Friday, it was trading at a wide $4.30 discount to April due to high stock levels at the main U.S. storage hub in Cushing, Oklahoma.

April futures were at $40.90 a barrel, holding above the $40 support level seen by some traders. The mid-$30s was expected to be the next floor.

“The $35 to $36 level should be a pretty strong support. I think OPEC will definitely cut more production if we get there,” said Clarence Chu, a trader at U.S.-based Hudson Capital Energy in Singapore.

London Brent crude for April rose 47 cents to $43.75.

Nigeria’s junior oil minister Odein Ajumogobia said volatile oil prices had made it difficult to forecast OPEC’s next move.

“Look at what the prices have been doing in the last couple of weeks, they’ve been very unpredictable,” Ajumogobia said.

But Iraqi Oil Minister Hussain al-Shahristani was firmer in his stance, saying the oil cartel should look to further cuts in supply if curbs to date fail to balance the market.

Shahristani had previously said he expected OPEC to cut its supply targets when it meets in March.

The top 600 companies in South Korea, Asia’s fourth largest economy, plan to cut their capital investments this year for the first time in eight years, South Korea’s main lobby group for large companies said on Tuesday.

World energy demand has fallen considerably in the last few months as the economic crisis hit consumers, pulling oil prices more than 70 percent off the peak above $147 touched last July.

To take advantage of low prices, Russia is working toward creating a state reserve to buy crude from producers, potentially removing up to 16 million tonnes of Russian oil from export markets, a top energy official said.

Prices may regain traction from improved consumption next year, with IEA Executive Director Nobuo Tanaka saying he expects world oil demand to resume growing in 2010 by about 1 million bpd.

But he cautioned about a supply crunch from next year if investment in new oil production and alternative forms of energy were reduced by the current demand downturn.

Later on Tuesday U.S. President Barack Obama is due to sign the $787 billion economic stimulus bill, while indicators including manufacturing production in New York State and U.S. home builder sentiment for February may set the market’s tone.