Oil edged down on Thursday, adding to the past two sessions’ $5 losses, as India and Malaysia’s decisions to raise fuel costs, together with weaker US consumption, heightened worries about falling oil demand.
US light crude for July delivery CLc1 fell 26 cents to $122.04 a barrel by 7:24 a.m., having settled down $2.01 on Wednesday at $122.30, its lowest settlement in almost a month. London Brent crude LCOc1 fell 45 cents to $121.65. “Weaker demand is the main concern now,” said Tetsu Emori, fund manager at Astmax in Tokyo. “With domestic prices in these emerging countries now quite high, people will cut their consumption and that is a worry for the market.”
India and Malaysia raised retail fuel prices on Wednesday, joining a growing number of Asian nations no longer able to afford big subsidies in the face of record-breaking oil prices. India raised retail petrol and diesel fuel prices by about 10% and Malaysia hiked petrol prices by 41 percent. Taiwan, Sri LankaIndonesia reviewed their subsidies last month. and
US weekly data added to the bearish sentiment as larger-than-expected builds in products stocks, and falling gasoline demand, trumped a surprisingly big drawdown in crude oil stocks. The US Energy Information Administration reported gasoline inventories rose 2.9 million barrels last week -- despite the start of the summer driving season -- while gasoline demand over the past four weeks slumped 1.4% versus last year. Distillate stocks jumped by 2.3 million barrels, while crude stocks fell 4.8 million barrels.
“Gasoline demand is still a primary focus and the loss of 1.4% during the past four weeks on a year-over-year basis and the cumulative year-over-year decline of 1% since the beginning of this year attests to a major change in consumer driving habits,” said Jim Ritterbusch, president of Ritterbusch & Associates of Galena, Illinois, in a post-market commentary. Adding to the downward pressures, the US dollar was steady near three-month highs on Thursday, holding gains made in the previous day after Federal Reserve chief Ben Bernanke emphasized inflation concerns. A stronger dollar tends to make dollar-denominated commodities less attractive to investors. (Reuters)