Oil recovered from lows to hover near six-week lows above $86 a barrel on Thursday as a build-up in US oil product stocks and receding geopolitical concerns outweighed a decision by the Organisation of the Petroleum Exporting Countries not to increase crude oil production.
Healthy inventory levels were among reasons cited by Organisation of the Petroleum Exporting Countries to keep output levels unchanged during the peak winter demand season and analysts said the drop in oil prices also reflected a firming US dollar, the currency in which crude is priced.
US crude futures were 85 cents cents down at $86.64 a barrel by 1345 GMT, after dipping as low as $85.82, a level not seen since October 24. It settled down 83 cents at $87.49 on Wednesday. London Brent crude was $1 lower at $87.49 a barrel.
US oil prices have fallen more than 12 per cent below the all-time peak of $99.29 hit on November 21. Oil has been falling since late November, which has clipped a rally of more than 40 per cent since August that put crude close to $100 a barrel.
Initial surge
Oil initially surged more than $2 on Wednesday after Organisation of the Petroleum Exporting Countries, which supplies more than a third of the world's oil, rebuffed calls from consumer nations to pump more by agreeing to keep output steady.
This bullish news was followed by more - a drop in US crude stockpiles last week, which plunged by a hefty eight million barrels to their lowest level in more than two years.
However, stocks of distillate fuels, which include diesel, rose by 1.4 million barrels against predictions of a decline of 300,000 barrels and gasoline inventories rose four million barrels, topping analysts' forecasts for an increase of 900,000 barrels. "The builds in product inventories certainly played a role in dampening crude oil's response, but we would say that crude oil's failure to rally on clearly bullish news helps confirm that this is now a bear market," Citigroup analysts noted.
Analysts said the market was probably concluding that there will be enough oil to swing the supply picture towards a more comfortable balance in early 2008, while demand could take a knock from a recession in top consumer the US.
A report earlier this week that grouped the findings of various US intelligence agencies and contradicted the Bush administration's assertion that Iran was intent on developing an atomic bomb has also dampened oil by reducing the so-called Iran risk premium in the price.
Via: Reuters
Healthy inventory levels were among reasons cited by Organisation of the Petroleum Exporting Countries to keep output levels unchanged during the peak winter demand season and analysts said the drop in oil prices also reflected a firming US dollar, the currency in which crude is priced.
US crude futures were 85 cents cents down at $86.64 a barrel by 1345 GMT, after dipping as low as $85.82, a level not seen since October 24. It settled down 83 cents at $87.49 on Wednesday. London Brent crude was $1 lower at $87.49 a barrel.
US oil prices have fallen more than 12 per cent below the all-time peak of $99.29 hit on November 21. Oil has been falling since late November, which has clipped a rally of more than 40 per cent since August that put crude close to $100 a barrel.
Initial surge
Oil initially surged more than $2 on Wednesday after Organisation of the Petroleum Exporting Countries, which supplies more than a third of the world's oil, rebuffed calls from consumer nations to pump more by agreeing to keep output steady.
This bullish news was followed by more - a drop in US crude stockpiles last week, which plunged by a hefty eight million barrels to their lowest level in more than two years.
However, stocks of distillate fuels, which include diesel, rose by 1.4 million barrels against predictions of a decline of 300,000 barrels and gasoline inventories rose four million barrels, topping analysts' forecasts for an increase of 900,000 barrels. "The builds in product inventories certainly played a role in dampening crude oil's response, but we would say that crude oil's failure to rally on clearly bullish news helps confirm that this is now a bear market," Citigroup analysts noted.
Analysts said the market was probably concluding that there will be enough oil to swing the supply picture towards a more comfortable balance in early 2008, while demand could take a knock from a recession in top consumer the US.
A report earlier this week that grouped the findings of various US intelligence agencies and contradicted the Bush administration's assertion that Iran was intent on developing an atomic bomb has also dampened oil by reducing the so-called Iran risk premium in the price.
Via: Reuters
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