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News 3 hrs ago 12/31/14

Oil Prices Hit Again

Source: Dow Jones News
LONDON--The rout in oil markets continued into the last day of the year as weaker Chinese economic data and a buildup in U.S. crude stockpiles fueled the bearish sentiment that drove prices off a cliff in 2014.

The selloff that started midsummer wiped off nearly half of oil's value amid growing concerns of global oversupply coupled with lackluster demand. Oil prices are set for their biggest annual loss since the recession in 2008.

Brent crude futures shed as much as 1.8%, falling to $56.87 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $53.51 a barrel, down more than 1% in the electronic session.

"It's difficult to see what will turn the market," said David Wech at JBC Energy. "Most news coming in is relatively bearish and an upside to prices looks unlikely anytime soon."

On Wednesday, China's factory data showed more sluggishness, with the final reading of the HSBC Manufacturing Purchasing Managers' Index at 49.6 in December, down from 50 in November. A sub-50 figure indicates contraction.

China is the world's second-largest consumer of oil and its manufacturing sector accounts for a big chunk of its fuel consumption.

Investors are bracing for data later on Wednesday from the U.S. Department of Energy that could show a net drop of 600,000 barrels in U.S. oil stockpiles, according to the market forecast.

Late Tuesday, however, the American Petroleum Institute said in its report that weekly total U.S. crude stockpiles rose by 760,000 barrels.

The surge in U.S. crude production, fueled by a boom in shale oil, has been adding to the global glut. Analysts estimate that the global crude market is currently running a surplus of 2 million barrels a day.

Speculators cut their net-long position in WTI oil in the week ended Dec. 23, the first reduction in four weeks, according to data from the U.S. Commodity Futures Trading Commission.

According to Mr. Wech, increased summer demand and the impact of lower prices which are squeezing shale producers will eventually balance the market.

"But the balancing will take time, perhaps not before the middle of the second quarter of 2015," Mr. Wech said. "The market will get worse before it gets better."

Nymex reformulated gasoline blendstock for January--the benchmark gasoline contract--fell 1.4% to $1.4338 a gallon, while ICE gasoil for January changed hands at $521.25 a metric ton, down $4.50 from Tuesday's settlement.

Eric Yep contributed to this article.

Write to Georgi Kantchev at [e-mail]