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Oil prices drop on rising stockpiles, Japan recession fears
[SINGAPORE] Crude oil prices fell on Wednesday after industry data showed an increase in US stockpiles, while fears that Japan's economy may have fallen into recession added to demand woes.
Benchmark US crude futures slipped to a two-week low at US$43.55 a barrel in early trading before edging back up to US$43.75 a barrel by 0609 GMT, still down almost half a dollar from their last close.
Internationally traded Brent crude futures were down 25 cents at US$47.19 a barrel.
The price drops came on the back of rising stockpiles in North America and slowing economies in Asia.
US crude stocks jumped by 6.3 million barrels in the week to Nov 6 to 486.1 million barrels, data from industry group the American Petroleum Institute showed late on Tuesday, compared with analyst expectations for an increase of 1 million barrels.
On the demand side, confidence among Japanese manufacturers fell in November for a third straight month to levels unseen in more than two years, a Reuters poll showed on Wednesday, reflecting fears that a China-led slowdown in overseas demand may have pushed Asia's second-biggest economy into recession. "The weakness of global manufacturing activity is ... putting pressure on energy demand," JBC Energy said, adding that it expected a significant drop in oil demand growth in 2016.
China's oil demand rose 0.9 per cent in October from a year earlier to 10.14 million barrels per day (bpd), according to Reuters' calculations based on preliminary government data, with many analysts expecting a further slowdown.
The oil market is also looking for any indicators from the Organization of the Petroleum Exporting Countries (Opec) over its production policy.
Since oil prices began falling in June 2014, Opec has followed a Saudi-led policy of keeping production high in order to defend market share against other producers such as Russia and North America. But there are calls from within the group from countries like Venezuela and Algeria to cut output to prop up prices.
But BNP Paribas said that it expected Opec and its policy leaders in the Middle East to continue pumping for market share. "As the next Opec meeting on Dec 4 looms closer, speculation over what the cartel will do next will rise. We do not expect any surprises from the next Opec meeting, and Opec's experiment in letting price bring adjustments to the world's oil balance has yet to run its full course," the bank said.