NEW YORK: Global oil prices slid on Wednesday (Feb 4) following a three-day rally with the main US contract sinking more than US$4 as US crude stockpiles mounted.
US benchmark West Texas Intermediate for delivery in March tumbled US$4.60, or 8.7 per cent from Tuesday’s close, to US$48.45 a barrel. In London trade Brent North Sea crude for March shed US$3.75 at US$54.16.
The drop wiped out much of the gains of the three-day rally, but crude remained well above its lows for the year. The market is well-supplied and there had been little concrete in the supply-demand equation to underpin the rise.
US oil stockpiles mounted again last week, hitting 30-year highs, according to US government data. Commercial crude inventories rose by 6.3 million barrels to hit a record 413.1 million barrels. Some of that could be explained by the worker strikes at refiners representing some 10 per cent of all US capacity.
But Larry Carl of market consultancy Frost & Sullivan pointed out that gasoline stocks had also risen. That “means we can afford not run to refineries too high, which is going to put more crude in the system,” he said. He called the recent sharp jump in crude prices “a little bit of irrational gibberish”.
Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo, said the crude market was extremely volatile after the three-day rally that began on Friday saw prices surge nearly 20 per cent.
“It has become increasingly difficult to discern the direction of the prices of crude oil, but the fundamentals remain unchanged,” Hasegawa told AFP. He said that prices could fluctuate in a US$20 range in the short term.