By Eric Yep
Oil's fall resumed in Asian trade Thursday after rallying
overnight as with market participants largely skeptical over
whether yesterday's price recovery can be sustained.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in February traded at $47.98 a barrel in recent trade,
down 50 cents in the Globex electronic session. February Brent
crude on London's ICE Futures exchange fell 59 cents to $48.10 a
barrel.
Traders said Wednesday's rally was likely to be a blip in a weak
market as some buyers moved in at low price levels, and prices were
now moving down as increased U.S. oil supplies are back in
focus.
Without some significant bullish surprise that curbs oversupply,
like a change in OPEC's oil policy, the market will have difficulty
making a sustained price recovery, analyst Tim Evans at Citi
Futures said in a report.
Australia's ANZ Bank said U.S. crude-oil stockpiles rose by 5.4
million barrels last week, far more than analysts' expectations and
pointing to continued oversupply in the market.
The bank has downgraded its Brent and WTI average oil price
forecasts for 2015 by 27% to $50 and $48 a barrel respectively as a
result of the sharp 35% drop in oil prices in the past six weeks,
its head of industry research Mark Pervan said.
"The mood will remain cautious for the remainder of the first
half of the year," before high-cost U.S. supply starts to contract
in the third quarter, he said.
The Organization of the Petroleum Exporting Countries will
publish its monthly report later Thursday and markets will be
looking out for the cartel's assessment of global oil supply and
demand.
Meanwhile, India's central bank made a surprise rate cut on the
back of low inflation and declining oil prices, its first rate cut
in nearly two years, as cheap energy costs slowly filters through
to Asia's emerging economies.
"This is likely to be just the first of a series of rate cuts in
2015, as the Reserve Bank of India continues to ease monetary
policy to reflect India's much improved inflation performance,"
Rajiv Biswas, Asia-Pacific Chief Economist at consulting firm IHS
Global Insight, said. He said weak oil prices will continue to ease
inflation in India in coming months.
The premium of Brent crude over Nymex West Texas Intermediate
has narrowed to less than 10 cents a barrel, with both the oil
benchmarks now almost trading at par.
In recent years, Brent--the global oil benchmark--traded well
above Nymex WTI crude--the U.S. oil benchmark, on the back of
strong global oil demand and because rising U.S. oil production
kept a lid on its domestic oil prices.
But now that the price spread between Brent and Nymex WTI crude
has sharply narrowed, U.S. refiners could take a hit as they no
longer enjoy the large price advantage of relatively cheaper crude
prices.
Nymex reformulated gasoline blendstock for February--the
benchmark gasoline contract--fell 70 points to $1.3437 a gallon,
while February diesel traded at $1.6403, 149 points lower.
ICE gasoil for February changed hands at $472.25 a metric ton,
up $13.75 from Wednesday's settlement.
Write to Eric Yep at eric.yep@wsj.com
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