Oil fell to one-month lows today below $76 a barrel after refiners in top consumer the United States processed the least crude in decades, reacting to a fuel demand slump, while talk of bank trading curbs upset speculators.
Proposals by US president Barack Obama to cut proprietary trading at large banks sent Asian stock markets and commodities tumbling. Japan's benchmark index lost almost 3 per cent, and the dollar slipped to its lowest in five weeks against the yen.
US refinery utilisation, the proportion of total capacity at which refiners operate, fell 2.9 percentage points to 78.4 per cent last week, a government report showed yesterday. That was the lowest since the 1980s, barring occasional periods of hurricane-related disruptions, Department of Energy data showed.
"For the refinery run rates, it's a bit on the surprise side," said Serene Lim, a Singapore-based oil analyst at ANZ. "At this time of year they shouldn't be dropping that much. With low demand, refiners don't find an incentive to produce more."
March-settlement US crude touched $75.62 a barrel, the lowest intraday price since December 23rd, and was trading down 26 cents at $75.82 by 5.29am. Prices have dropped more than $8 from a 15-month low of almost $84 on January 11th. London Brent crude for March declined 18 cents to $74.40.
US regulator Commodities and Futures Trading Commission (CFTC) on January 14th announced proposals to put a cap on the size of positions dealers can hold, aiming to limit speculation. Most traders considered the proposals to be not as strict as feared.
Prices were also under pressure from concerns that China would take further measures to temper its booming economy, Lim said, after China yesterday reported fourth quarter growth of 10.7 per cent, its first double-digit figure since 2008.
China's apparent demand for oil products will grow by about 4 per cent this year, the National Energy Administration (NEA) said, a slower pace than the 6.3 per cent growth for 2009, according to Reuters calculations based on official figures.
US gasoline inventories rose a larger-than expected 3.9 million barrels the week ended January 15th, despite the reduced operating rates at refineries. Total demand for oil products over the past four weeks slid by 1.8 per cent from a year earlier.
Demand for distillates, a fuel category that includes heating oil and diesel, plunged 6.8 per cent from a year earlier following the return of warmer weather to the US Northeast last week.
Temperatures in the region were forecast to stay above normal through Tuesday next week, according to Telvent DTN. And analysts said even another cold snap following unseasonably cold conditions in late December and early January would have a limited and temporary effect on prices.
"While a return to cold conditions in the U.S. next week should be enough to trigger a brief rebound to $80, we must remember that the clock is ticking on the weather trade and that demand typically falls by 1-2 million barrels per day in the second quarter," JP Morgan said in an e-mailed note.
Reuters