Oil fell over 2 per cent towards $48 a barrel today, paring much of the previous session's gains, dragged down by a bearish industry report showing a larger-than-expected rise in US crude stocks and a slew of weak economic data.
US crude for May delivery fell $1.20 to $48.46 by 2.23am, erasing much of yesterday's 2.6 per cent gain that lifted the contract to $49.66 a barrel.
London Brent crude fell $1.03 to $48.20.
“The bearish API data is probably the main reason for the sell-off. Investors are probably also seeing last night's rally as overdone, which is true since the rally came despite all the gloomy economic data,” said Gerard Rigby, an analyst at Fuel First Consulting in Sydney.
Crude futures yesterday rose in tandem with Wall Street, which was headed for its best month in six years, despite gloomy data showing US house prices had plunged at a record pace of 19 per cent in January, while consumer confidence held just above record lows in March.
But analysts said bearish numbers from the American Petroleum Institute showing crude stocks rose by a greater-than-expected 3.3 million barrels to 357.8 million barrels in the week to March 27th, were encouraging investors to take profit.
The API data is seen as foreshadowing a similarly dismal report by the more widely tracked US Energy Information Administration, due to be released later in the day, which is expected to show a 2.5 million barrel increase in oil stockpiles that have already swelled to their highest level since 1993.
Poor business confidence from Japan also pointed to a bleak near-term demand outlook for oil.
Japanese business confidence tumbled at its fastest pace ever in the first quarter to the worst on record, the Bank of Japan's tankan corporate survey showed, highlighting the pain companies are facing as the global economic crisis scythes through Japan's exports.
Compounding the gloom was a forecast by Organisation for Economic Co-operation and Development that world trade was in free fall and should decline by 13.2 per cent in 2009 as the economic crisis cuts demand across the globe.
Reuters