NEW YORK: Brent crude hit a 27-month low yesterday before recovering partially to close above $91 a barrel, with analysts saying the market could be headed for a rebound despite growing stockpiles and a gloomy world economic outlook.
US crude stocks climbed by 5 million barrels to 361.65 million in the week to October 3, data from the Energy Information Administration showed. The build was way above the 1.5 million barrels forecast by analysts in a poll, but in line with preliminary stockpile data issued on Tuesday by the American Petroleum Institute.
Some analysts also saw the EIA numbers differently, pointing especially to a stockpile draw in Cushing, Oklahoma, the delivery point of the US crude contract, which brought down inventories there by 1.6 million barrels.
“To me, that was bullish,” said Andy Lebow, vice president at Jefferies Bache in New York. “At this moment, the action is not terrible, and it wouldn’t surprise me to see some kind of short covering rally on the cards as the market’s been routed the last couple of days.”
Brent crude for November delivery settled down 73 cents, or 0.8 percent, at $91.38 a barrel. It fell to as low as $90.57 earlier, marking a bottom since June 2012. Except for one session, Brent has been down daily from September 30, losing about 6 percent in that period.
US crude finished down $1.54, or 1.7 percent, at $87.31 a barrel, after hitting $86.83, its lowest level since April 2013.
The spread between the two crude markets crept back up, to above $4 after falling to as low as $2.41 on October 2.
While the Cushing draw was encouraging to some, gasoline stockpiles and imports were both up. In addition, the EIA cut its global demand forecast for 2014 by 1.24 million barrels on Tuesday, and trimmed its Brent crude price forecast for 2015. That forecast came as the International Monetary Fund cut its global economic growth forecasts for the third time this year, warning of weaker growth in core euro zone countries, Japan and major emerging markets such as Brazil. The dollar held to its recent strength early yesterday before falling in later trade while global stock markets plumbed a six-month low.
“We could probably see some short-covering, but not a lot, as we are still teeing off on the dollar and other negatives out of Europe,” said Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois.
The Organisation of the Petroleum Exporting Countries is due to meet in Vienna on November 27, and analysts say the group could significantly cut its output target from 30 million barrels per day (bpd).
Reuters
