The oil market kicked off 2009 feebly on Friday, falling nearly 8% partly in reaction to a sharp rally late on Wednesday.
US light, sweet crude fell $2.84 to $41.76 a barrel by 10:35 a.m., reversing part of Wednesday’s $5.57 a barrel gains. It touched a low of $41.05. London Brent dropped $3.06 to $42.53 a barrel.
In 2008 oil initially rose by more than $50 to touch a record peak of $147 before falling by more than $110. Oil surged 14% on the last trading day of 2008 after weekly US data showed a decrease in refinery activity and an unexpected 500,000-barrel rise in crude stocks.
Refined product inventories also rose, though less than analysts expected. Gasoline stockpiles were up 800,000 barrels, versus a forecast of 1.5 million barrels, while distillates rose by 700,000 barrels, versus an expected 1.1 million barrels. Factory activity surveys in the United States and Europe due on Friday are expected to show steeper contractions in December.
Demand wavered in Asia, with Chinese commercial fuel stocks rising to another record high in November, while Indian refinery production fell versus a year ago for the first time in three years. “The recent crop of demand side indications for oil has been rather ambiguous. In itself, that is something of a change, given a fairly long period during which the demand side numbers have been weakening fairly consistently,” Barclay’s Capital wrote in a note to investors.
Oil markets have also watched cautiously the dispute between the world’s biggest non-OPEC oil exporter, Russia, and its neighbors over natural gas supplies. Russia shut off gas to its neighbor Ukraine on Thursday, after a contract dispute, but said it had increased supplies to other European states to try to reassure its premium-paying customers.
The row could stir new doubts about Moscow’s reliability as an energy supplier and fuel suspicions in the West -- already running high since Russia’s war with Georgia last August -- that the Kremlin bullies its pro-Western neighbors. However, similar past disputes rarely had an impact on oil flows.
The Swedish Defense Research Agency, a government-linked body, said in a report in March 2006 that Russia had cut off oil and gas exports on around 40 occasions. Moscow denies that it uses energy as a political tool. (Reuters)