Oil continues to decline
Posted by | Posted in Business News | Posted on 22-09-2009
LONDON(Reuters) — Oil prices fell towards $68 a barrel after dropping nearly 4% in the previous session as a surprise jump in U.S. crude and product stocks stirred doubts that prices may have run ahead of demand fundamentals.
U.S. crude for November delivery fell 55 cents to $68.42 a barrel.
The U.S. Energy Information Administration’s weekly data showed Wednesday that commercial stockpiles of crude gained 2.8 million barrels against analyst expectations for a 1.5 million barrel fall.
Inventories of gasoline and distillate stocks also rose sharply, fueling concerns that demand in the world’s largest oil consumer is still fragile.
“A few factors were at play last night and the most notable was the U.S. inventories number and that was unambiguously bearish,” said Toby Hassall, a commodities analyst at CWA Pty. Ltd. in Sydney.
The dollar softened Thursday after the Federal Reserve reiterated its promise to hold interest rates very low for a long time, but this had no impact on oil prices.
Oil prices typically rise when the dollar falls as investors buy dollar-denominated commodities such as oil as a hedge.
Analysts said investors were instead focused on oil demand fundamentals.
“The very, very surprising build in all major products and crude is still on the minds of most people and that has more of an impact than the dollar,” said Andy Sommer, an analyst with EGL in Switzerland.
But for now, technical analysts cited $68 a barrel on U.S. crude as a key support level and this could prevent further losses.
Oil prices have traded between $65-$75 a barrel since the start of August and many analysts feel some convincing evidence of a recovery is needed to justify a push back up towards the top of this range.
Investors are expected to keep a keen watch on key economic data such as U.S. weekly jobs data and August home sales due out later on Thursday for clues about the broader health of the U.S. economy.
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