Brent slips further below $109
Oil prices under pressure as crude inventories rise in the United States
Brent futures slipped below $109 a barrel this morning on a revival of concern over demand growth in top two oil consumers China and the United States, while a strengthening dollar added pressure on prices.
Comments by China's central bank on stabilising inflation expectations reinforced investor worries it may drop its pro-growth policy before economic expansion gathers full momentum, weighing on most markets in Asia. Oil faced further pressure as the International Energy Agency cut its global demand outlook.
Brent crude slipped 12 cents to $108.40 a barrel by 04.31 GMT, dropping for the fifth straight day. US oil declined 25 cents to $92.27, extending losses for a second day.
"The IEA's report noted a subdued rate of growth in demand and that is probably weighing," said Natalie Rampono, commodity strategist at ANZ in Melbourne. "But what the market is trying to focus on is China's tightening policy. A lot of people have been pricing in a strong pickup in oil demand from China this year and some of those expectations may be pared back."
Prices, particularly the US contract, were also under pressure as crude inventories in the world's largest oil consumer rose last week, data from the Energy Information Administration showed yesterday.
Crude inventories rose 2.62 million barrels in the week to March 8, compared with analysts' expectations for a rise of 2.3 million barrels. The rise came as crude imports increased by 227,000 barrels per day (bpd) to 7.49 million bpd.
Refinery utilization fell 1.2 percentage points to 81 per cent of total capacity, EIA data showed, compared with expectations for a rise of 0.2 percentage point.
Oil markets are also under pressure from a stronger dollar. The US dollar hovered near seven-month highs against a basket of currencies today.
The dollar index stood at 82.845, after climbing as far as 83.055 yesterday, as US retail sales rose at their fastest clip in five months in February. The report is the latest in a string of data putting the world's biggest economy well on the recovery path.
A stronger dollar can make oil more expensive for holders of other currencies.
The IEA, which coordinates the energy policies of major consuming nations, said in its monthly oil market report it remained bearish on oil demand for 2013 and trimmed its outlook for oil demand growth by 20,000 bpd to 820,000 bpd.
"The subdued growth rate of oil demand now looks increasingly entrenched in the face of high oil prices and weak economic growth," it said.
Brent is expected to break support at $107.85 per barrel and fall further to $106.49, while US oil is expected to drop into a range of $90.91 to $91.40 as a rebound from the March 4 low of $89.33 has been completed.