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FYI



Oil falls to $43 ahead of US inventory data

Published Date: January 28, 2009

LONDON: Oil prices fell towards $43 a barrel yesterday as the market began to anticipate data showing rising fuel inventories in top energy consumer the United States that reflect economic slowdown.

Prices had earlier advanced more than a dollar from Monday, boosted partly by cold weather in the US, plus signs OPEC oil supply cuts may have begun to bite.

US light, sweet crude for March delivery fell $1.94 to $43.79 a barrel by 1452 GMT. It earlier touched a session high of $47.49 a barrel and a session low of $43.70. US crude has rebounded from below $33 a barrel in the past week.

London Brent crude fell $2.33 to $44.63 a barrel. "The retreat toward the lower end of the trading range suggests the market is anticipating stock builds in the API figures," said Christopher Bellew of broker Bache Commodities Ltd.

The American Petroleum Institute (API), an industry body, has moved publication of its weekly inventory report today, a day before official data from the Energy Information Administration released on Wednesday.

The EIA data is forecast to show that US crude oil stocks rose a further 2.7 million barrels last week, the fifth straight week of gains.

Colder weather is expected to help draw down distillate stocks by 800,000 barrels, according to a Reuters poll. Gasoline stocks are likely to have risen by 1.3 million barrels.

The US cold snap has helped prices move up from lows earlier in January of $32.7 a barrel, but analysts say the recovery may be temporary. "Unless OPEC production cuts in January were substantially greater than what we have assumed, it is still too early to be calling an end to this current bear market," Goldman Sachs said in a research note.

Goldman said retail investors were moving into oil, attracted by its low price, so that speculative positions or "length" in the oil market is now larger at $45 a barrel than it was at $147.

Oil's supply/demand picture remains weak, Goldman said, pointing to a large counter-seasonal stock build in the United States and extremely weak demand in China, the world's second largest energy consumer. Oil has dropped more than $100 from a record peak above $147 a barrel in July last year, depressed by falls in demand as the credit crisis has pushed the global economy towards recession.

In the United States, for example, prices of single family homes fell a record 18.2 percent in November from a year earlier, showing the depth of the recession in the US housing market.

The Organization of the Petroleum Exporting Countries has agreed to reduce supply by 4.2 million barrels per day since September to try to support prices. The producer group is due to meet next in March. A cyclone off western Australia has shut down nearly half of the country's oil output, but some operators said production was likely to resume by today as the storm weakens. -Reuters