Oil prices slide below US$50

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Báo Đầu Tư English - 2 month(s) ago 10 readings

LONDON: Oil prices took a battering on Thursday (Mar 9), with US prices falling below US$50 for the first time this year, on signs a global supply glut is not going away.

Major oil producers began talks in Qatar on Sunday to try to reach a deal on capping production to boost prices, despite Iran's absence. (AFP/Haidar Mohammed Ali)

The euro meanwhile rallied briefly against the dollar as the ECB said it no longer saw a deflation threat and would end some of its massive support for the eurozone economy.

Equities were under pressure during Asian and much of European trading after as a closely-watched report showed a shock surge in US oil inventories, rekindling worries about the oversupply that has hammered the crude market since mid-2014.

The Energy Department on Wednesday revealed a whopping eight-million barrel increase in supplies over the past week - four times more than expected - owing to higher domestic production and increased stockpiling.

Both main oil futures contracts slumped to lows not seen since the end of last year and sending New York prices sliding below US$50 a barrel.

Jeffrey Halley, senior market analyst at Oanda trading group, said the inventories report was the "straw that broke the camel's back", with concerns already abounding that Russia was not pulling its weight on much-vaunted production cuts agreed between OPEC and non-OPEC countries in November.

In Thursday trading, shares in oil giant Royal Dutch Shell shed 2.0 per cent and rival BP lost 1.5 per cent on the London stock market. The FTSE 100 index was weighed down also by falling mining shares.

Asian energy firms had already taken a hit, with Japan's Inpex shedding 1.2 per cent, Hong Kong-listed PetroChina diving 2.2 per cent and CNOOC losing 1.8 per cent.

Woodside Petroleum fell 1.1 per cent in Sydney and later in European activity, French energy group Total slid 0.8 per cent.

"The data catalysed a new wave of glut concerns as the higher oil price might spur North American's production, especially of shale oil, which may ultimately counterbalance OPEC's effort to support oil prices," said CMC Markets analyst Margaret Yang.

Meanwhile, US stocks drifted upwards on Thursday after data on new US jobless claims last week indicated a healthy labour market, beefing up expectations for a positive key government jobs report on Friday and the likelihood the Federal Reserve will hike interest rates next week.

EURO BOUNCES HIGHER

The European Central Bank, as widely expected, kept interest rates at historically low levels and its massive bond-buying quantitative easing (QE) programme to support for the eurozone economy intact, despite growing evidence the health of the bloc is improving.

That helped eurozone equities perk up in afternoon trading.

The ECB increased its forecast for growth in the eurozone this year to 1.8 per cent and now expects inflation of 1.7 per cent - close to its target of just under 2.0 per cent.

The euro spiked higher, gaining more than 50 cents to briefly break above US$1.06, after ECB chief Mario Draghi signalled that the central bank no longer sees an urgent need to undertake any additional measures to support the economy.

"Deflation is no longer the concern for the ECB - prices are not rising fast enough to warrant tapering or higher rates, but the imminent risk of deflation has passed," said Neil Wilson, senior market analyst at ETX Capital.

"That's something of a watershed moment - the end of the beginning in terms of unconventional monetary policy tools perhaps," he added.

Moreover the ECB signalled it would not renew one of its programmes to support increased bank lending.

Source AFP

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