Friday January 11, 01:16 PM
Oil falls as supply threats ease, fears over possible US recession linger
LONDON (Thomson Financial) - Oil turned lower amid lingering fears over a possible US recession, and as players took in reports Nigerian oil supply was not disrupted following an tanker explosion.
The explosion, which occurred in a
general cargo area and not an export terminal, was also not related to any terrorist activity, noted MF Global's senior broker, Robert Laughlin,
'The vessel wasn't in a harbour ... its doesn't look like a terrorist incident,' he said, adding that for now recessionary worries are lessening the terror risk premium.
At 12.53 pm, New York's WTI (West Texas Intermediate) crude for February delivery was down 58 cents at 93.14 usd per barrel, having fallen 1.96 usd yesterday.
Meanwhile, London's Brent crude for February delivery was down 54 cents at 91.68 usd per barrel.
Prices were up in earlier trade amid hopes the US Federal Reserve will cut interest rates aggressively in a bid to shore up the ailing US economy and prevent a recession.
Fed chairman Ben Bernanke said in a speech yesterday US economic prospects for the year have worsened and that the central bank stands ready to take 'substantive additional action' to support growth.
Laughlin said oil might struggle to climb higher in the medium term because the US economy could well slip into recession even if the Fed cuts rates sharply.
'(Bernanke) said clearly the US economy is in a worse position than was first thought and it is deteriorating week by week. The recessionary woes are the biggest worry (for oil) at the moment,' he said.
Oil prices have fallen some 7 usd after hitting an all time record of 100.09 usd in New York last Thursday on increased fund buying, warm weather forecasts and worries over falling US crude stocks.
US crude stocks are currently at their lowest levels in 3 years. However, market attention is slowly shifting to increasing fuel stocks and higher refinery runs.
As such, supply fears are easing slightly and in their place, worries over demand are rising amid increasingly gloomy economic prospects in the US, the world's largest oil consumer.
Elsewhere, traders are looking forward to Feb 1, when the OPEC cartel meets to set output quotas. The cartel, supplier of nearly 40 pct of the world's oil, left quotas unchanged at its December meeting.
'We think the most severe part of the price decline in energy -- when and if it should occur -- will most likely take place by month's end, when the markets start to discount the OPEC meeting,' said MF Global analyst Ed Meir.
Meir believes OPEC could well opt to raise output at its Feb 1 meeting in Vienna, especially if US crude stocks keep declining while demand growth stalls shows little sign of stalling.
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