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Oil near six-year lows after US stockpiles hit record high
[SINGAPORE] Oil remained weak in Asia on Thursday after data showing record US stockpiles sent prices tumbling to the lowest level in nearly six years in the previous session and analysts said a global glut would continue to keep the market under pressure.
The US Energy Information Administration (EIA) said domestic crude oil stocks rose by almost 9 million barrels last week to reach nearly 407 million, the highest level since the government began keeping records in 1982.
"The market expects stockpiles to keep rising, pushing front-month prices further down as refineries enter maintenance season and are likely run at lower utilisation rates," ANZ said in a note.
Prices on Thursday stuck close to the previous settlement levels. Brent was trading at US$48.50 a barrel at 0741 GMT, virtually flat with its last settlement, while US crude was at US$44.41, versus the low of US$44.08 hit on Wednesday, the weakest since April 2009.
Analysts said the outlook remained weak, especially with demand slowing in China.
"The Chinese government is moving away from the post-2008 investment binge and gradually moving towards a more moderate but sustainable consumption-led economic growth," Wood Mackenzie said on Thursday.
"2014 was the fourth straight year of a decoupling relationship between China's GDP and oil demand growth as the effects of the 2009 stimulus began to fade," it said, adding that it "expects industrial recovery and related investment will remain subdued in 2015-2016".
Swiss bank UBS said cheap oil would not provide a big boost to Asian economic growth. "Big, big drops in oil; small effects on economies ... Cheap oil should give a small boost to Asian GDP, but not really enough to warrant major changes in growth forecasts," it said.
Researchers at Energy Aspects said in a note that "a new normal is in the making for China - slower and less oil-intensive growth".
They added that "oil consumption in China will become more efficient, leading to slower demand growth of around 0.2-0.3 million barrels per day compared to expectations of above 0.5 million".
Price swings in Brent contracts have been falling since the beginning of the year and there seems to be some support around current levels, but not enough conviction to move prices towards or back above US$50 per barrel.
The Volatility Index from front-month Brent crude contracts has fallen from around 65 points at the beginning of the year to just over 53 points currently, its lowest since 2009.