Brent crude oil slides to $99 per barrel

Brent crude slid towards $99 per barrel on Wednesday, weighed by the prospect of sluggish fuel demand in top consumers the United States and China and rising stockpiles of US crude. More bleak economic news came courtesy of the International Monetary Fund (IMF), which trimmed projections for this year and next - implying limited upside for oil demand growth. The North Sea benchmark has lost nearly 6 per cent over the past five sessions in a wider commodities rout triggered by data showing growth in China, the world’s second largest oil burner, had slowed unexpectedly in the first three months of 2013. Gold later bounced back, although other metals such as copper continued to decline. “At the moment the oil complex is in a technical downtrend with the fundamentals being driven by a deteriorating demand projection in a robust supply environment,” said Dominick Chirichella of Energy Management Institute. The head of the International Energy Agency, Maria van der Hoeven, said the oil price decline was proof that the market was adequately supplied. Brent crude shed 75 cents to $99.16 a barrel by 0939 GMT, after dropping to $98 on Tuesday, the weakest since July 2012. US crude slipped 72 cents to $88.00 a barrel. “For now there is no immediate reason - other than short covering - to suggest that oil prices are ready for strong move to the upside,” said Chirichella. While further weakness in Brent crude cannot be ruled out, oil prices are unlikely to fall below the $100 a barrel mark past the second quarter, Barclays said in a note on Tuesday. A pick-up in hedging activity from consumers who have been waiting on the sidelines for better entry points for their hedging programmes could help support prices, it added. “The second layer of support is likely to come through market expectations surrounding comfort levels for Opec producers to continue producing above their target, below the $100/barrel, which they have lately mentioned as appropriate for both consumers and producers,” according to Barclays. Data from the American Petroleum Institute (API) showed total weekly US crude stocks dropped by 6.7 million barrels, in contrast to a Reuters survey in which analysts forecast a rise of 1.3 million. More closely watched data from the US government agency, the Energy Information Administration, will be released Wednesday at 10:30am EDT (1430 GMT). West Texas Intermediate fell for the fourth time in five days, trading near the lowest level in almost four months before government data forecast to show US crude inventories rose last week. WTI dropped as much as 1.7 per cent. An Energy Department report today may show crude supplies rose 1.2 million barrels to the highest level in 22 years, according to a Bloomberg survey. That’s contrary to a report yesterday from the American Petroleum Institute, which showed stockpiles slid 6.7 million barrels last week, the most since the seven days ended December 28. “The oil market is looking quite weak and there’s a comfortable supply-demand situation in the short term,” said Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, who predicts the European benchmark, Brent, may tumble to $80 a barrel in the first half. “The fundamental reason for the bearish situation is the cautious outlook worldwide.” WTI for May delivery declined as much as $1.50 to $87.22 a barrel, and was at $87.27 in electronic trading on the New York Mercantile Exchange at 1:03pm London time. The volume of all futures traded was 47 per cent above the 100-day average. The contract closed at $88.71 on April 15, the lowest since December 24. Prices are down 4.8 per cent this year. Brent for June settlement slipped $1.15 cents to $98.76 a barrel on the London-based ICE Futures Europe exchange. The contract fell to $99.91 yesterday, the lowest close since July 10. The front-month contract’s premium to WTI shrank to as little as $10.53, the narrowest since April 12. Bollinger Band WTI settled below the 30-day lower Bollinger Band for a second day yesterday, signalling the market is oversold, according to data compiled by Bloomberg. WTI also rebounded in early March after dropping below this band. The indicator, at around $88.63 today, presents technical support, a level where buy orders may be clustered. BNP Paribas SA cut its 2013 forecasts for Brent and WTI to reflect the price drop in the first quarter. The bank trimmed its Brent estimate to $108 a barrel from $115 and WTI to $95 from $100. Prices will recover in the second half, supported by “loose” global monetary policy and political threats to supply, Harry Tchilinguirian, head of commodity markets strategy, said in an e-mailed report. Source: Gulfnews.com