Oil prices drop as US recovery hopes wane
Oil prices fell to below $57 a barrel on Thursday as weak United States retail sales and housing figures dampened optimism about an economic turnaround and a new study predicted oil demand would fall by 3% this year.
Benchmark crude for June delivery was down $1,06 to $56,96 a barrel by midday in Europe, in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract fell 83 cents to settle at $58,02.
In London, Brent prices fell 74 cents to $56,60 a barrel on the ICE Futures exchange.
The Paris-based International Energy Agency said it expects global oil consumption to fall by 3% in 2009 to 83,2-million barrels a day this year, or 2,6-million barrels a day less than in 2008.
It was the ninth consecutive monthly cut that the IEA has made to its oil demand forecast. In its previous report, the IEA said it saw a 2,8% demand drop this year.
Coming after a 0,3% fall in crude consumption in 2008, this will be the first time oil demand has fallen for two consecutive years since 1982-1983.
Prices have jumped from near $50 a barrel earlier this month—and rose above $60 earlier this week—on hopes that the worst of the recession is over the US economy, the world’s biggest oil consumer.
But figures showed that US retail sales unexpectedly fell in April, and department story Macy’s Inc said its loss in the first-quarter widened from a year ago.
The American housing market also continues to struggle. RealtyTrac data said on Wednesday that April’s foreclosures were up 32% from a year ago, and up slightly from March.
Higher crude prices are raising gasoline prices as well, which could help snuff out any nascent recovery in demand.
“We shouldn’t expect the US consumer to be as strong as they’ve been over the last few years,” said Ben Westmore, an energy analyst with National Australia Bank in Melbourne.
Oil will likely trade sideways for the next few months before a global economic recovery at the end of the year boosts demand and prices, Westmore said.
“You have these two opposing forces,” Westmore said. “On the one hand, fundamentals and the massive inventories that need to be drawn down weighing on prices, and on the other, market speculation coming back to equity and commodities, looking for a turning point.”
In other Nymex trading, gasoline for June delivery fell 1,68 cents to $1,6720 a gallon and heating oil slid 2,07 cents to $1,4693 a gallon. Natural gas for June delivery dropped 8,1 cents to $4,252 per 1 000 cubic feet.—Sapa