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Oil markets drop further after crashing on inventory concerns
[SINGAPORE] Oil markets edged lower on Thursday after big losses in the previous session as record high oil inventories in the United States had cut short a four-day rally.
Prices had gained in early trade on optimism that steps by China's central bank to pour fresh liquidity into the world's second-biggest economy by lowering banks' reserve requirements would spur demand for energy.
Oil markets remain highly volatile, with US crude losing 9 per cent on Wednesday in one of its biggest routs ever. In the previous four sessions, prices had rallied almost 19 per cent from their lowest in nearly six years.
Brent crude for March delivery was 14 cents lower at $54.02 a barrel by 0546 GMT, after touching US$55 a barrel earlier in the day. The contract had settled US$3.21 or 5.5 per cent lower the previous day.
US crude traded 36 cents lower at US$48.09 a barrel. The contract traded above US$49 a barrel earlier in the session, after closing down almost 9 per cent on Wednesday after the large build-up in inventories.
US crude stocks increased by 6.3 million barrels last week, rising for the fourth consecutive week to hit a record high of 413.06 million barrels, data from the Energy Information Administration showed.
Crude prices began to rise last week from near six-year lows, in part due to a reported downturn in US rig activity that could eventually dampen rapid growth in shale oil production. "However, production from existing completed wells is currently unaffected and is contributing to consistent weekly stock builds," analysts at BNP Paribas said in a note.
Moreover, seasonal demand is expected to fall in the second quarter as refineries enter spring maintenance. "The resulting drop in demand for crude at refineries is likely to lead to further large crude inventory builds," BNP Paribas said.
Negotiations continued over a new wage contract for striking US refinery workers with lead oil company negotiator Royal Dutch Shell Plc making the workers' union a new offer late on Wednesday.
The United Steelworkers union (USW) said it will respond to the offer on Thursday. The strike began on Sunday affecting nine plants with about 10 per cent of US refining capacity.
In Libya, gunmen killed 12 people after storming a remote oilfield, raising further doubts about the likelihood of an increase in exports from the OPEC member.