Crude oil futures fell by over $1 a barrel in Asia on Monday, December 14, 2009 while traders moved apprehension toward feeble supply-demand fundamentals that are weighing heavily on prices.
"U.S. oil product inventories such as gasoline are bloated, making it difficult for oil futures to trade in the mid-$70 range, according to Ben Westmore, commodities economist at National Australia Bank in Melbourne," reported Wayne Ma on the Dow Jones Newswires.
"Sentiment toward oil changed pretty quickly (after the inventory data). Distillate stocks are still at very high levels. The drawdown (in inventory) that had been factored into high prices hasn't materialized," Westmore said.
On the New York Mercantile Exchange today, light, sweet crude futures slotted for January '10 delivery sold at $69.60 a barrel at 0629 GMT, down $0.27 in the Globex electronic session. January Brent crude on London's ICE Futures exchange went up to $0.23 to $72.11 a barrel.
Any indications that oil-product supplies are waning will send prices back up into the mid-$70s, Westmore said, pointing out that oil would be very likely to move past $80 a barrel in 2010 due of projected supply constraints.
"Earlier this year, signs that the world's biggest oil consumer was pulling out of recession raised hopes that demand would rise. Instead, demand has stagnated in the U.S. and supplies of fuel are rising globally, although crude stockpiles may have begun to decline," reported Brian Baskin in a separate article, also on the Dow Jones Newswire. "Meanwhile, investors have begun buying the dollar, anticipating that a quicker rebound in the economy could lead the Federal Reserve to raise interest rates. That's left oil futures with little support for a push toward the upside, and a rapidly strengthening dollar pulling down."
Demand for oil is estimated to rise by 1.5 million barrels a day next year, said the International Energy Agency on Friday, somewhat more than this year's predicted decline. Worldwide oil and fuel inventories are beginning to drop, but could still cover 59.4 days of demand, 2.5 days more than a year ago, the IEA said in its monthly market article.
"Even if demand improves a bit, there's a lot of supply that has to be worked out," said PFGBest analyst Phil Flynn.