Oil falls towards $99, US inventories weigh

LONDON - Oil eased towards $99 a barrel on Thursday, retreating from a record high, as bulging fuel stockpiles in the United States added to concern over its slowing economy.

By (Reuters)

Published: Thu 28 Feb 2008, 6:12 PM

Last updated: Sun 5 Apr 2015, 12:25 PM

U.S. crude stocks rose last week for the seventh week, while sluggish demand pushed gasoline supply up for the 16th week in a row, according to a weekly report from the Energy Information Administration (EIA).

“In terms of fundamentals, it’s hard to justify the ferocity of the market’s rally,” said Robert Laughlin of MF Global. “The weakness in the U.S. economy is now affecting demand.”

U.S. crude fell 40 cents to $99.24 a barrel by 1050 GMT, having hit a record high of $102.08 on Wednesday. London Brent crude dropped 46 cents to $97.81.

“The sell-off had been driven by the U.S. oil stockpiles,” said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo. “But still, it is risky to go short because there is uncertainty over the OPEC meeting next week.”

Expectations that the Organization of the Petroleum Exporting Countries will not raise production at its meeting on March 5 limited oil’s decline, as did winter fuel demand in the United States and Europe.

OPEC’s president, Chakib Khelil of Algeria, said on Tuesday members would not raise output, in part because of concern about a demand slowdown.

Oil remained within a few dollars of the inflation-adjusted peak of $102.53 reached in 1980 and was supported by the weak U.S. dollar, which was trading near an all-time low against the euro.

Analysts who use past price movements to predict future direction said a move a few dollars higher for U.S. crude, also known as WTI, could lead to further gains.

“With the dollar in freefall, we would be concerned that if WTI rallies above $102-$103 it would trigger a further surge towards $110-$115,” Barclays Capital technical analysts said in a report.

“For the time being, we are hopeful that $102-$103 will continue to cap and dip back towards $99, or even $97, before a more important test of the upside occurs.”

Investors have pumped cash into commodities in recent weeks, seeking a hedge against inflation and betting on signs the U.S. Federal Reserve will keep cutting rates to prop up the economy.

Some other commodities also took a breather on Thursday. Platinum, which hit a record high last week, fell more than 2 percent and copper slipped from a 21-month high.