Crude futures are set to post their biggest weekly loss in five weeks, with Brent edging down toward $102 per barrel today, as ample supply and a slow global economic recovery fuelled worries that demand for oil would be hit.
Crude inventories in the United States are near record levels as the world's top oil consumer produced more from shale, while shrinking factory activity in China capped fuel demand growth at the world's second largest user.
Improved US jobs and home sales data also sparked worries that the Federal Reserve could soon scale back bond purchases and tighten liquidity in markets.
Brent slipped 14 cents to $102.30 this moring, stretching its losses into a fourth session. US crude inched down 35 cents to $93.90 a barrel.
Both were on track for a more than 2 per cent drop this week - their biggest weekly drop since the week ended April 19th.
"There is a lot of supply. Inventories are high in the U.S. and I don't expect a big increase in demand from China," said Ken Hasegawa, a commodity sales manager at Newedge Japan.
“Oil still has some room to fall further. It’s possible for Brent to fall to $95 within the next two months.”
Brent hit a three-week low yesterday after a survey showed that China’s factory activity shrank for the first time in seven months in May, stoking worries over the demand outlook for commodities.
Investors are looking for a rebound in China’s economic growth in the second half of the year that could lift the outlook for fuel demand.
"We expect China's quarter-on-quarter GDP growth to accelerate in the rest of this year, although year-on-year growth could come in flat or even fall," Bank of America Merrill Lynch economists said in a note.
The oil market is now eyeing the US driving season which starts this weekend for indications on demand.
Traders have cautioned that there is more than enough gasoline to meet seasonal demand. US gasoline stockpiles last week were close to the highest level for this time of the year since 1999, government data showed.
Reuters
