Oil prices extend losses in Asia after inventory report

[SINGAPORE] Crude prices extended losses in Asia Thursday after another report showing a further increase in US stockpiles added to fears about a global glut, while the dollar strengthened after the Federal Reserve hiked interest rates.

The under-pressure commodity suffered fresh selling on Wednesday after the US Department of Energy showed that supplies rose 4.8 million barrels in the week ending December 11.

While they recovered slightly in early Asian trade, the two main contracts retreated by mid-morning.

At around 0320 GMT, US benchmark West Texas Intermediate for January delivery was down six cents at US$35.46 while Brent crude for February, a new contract, was down 15 cents at US$37.24.

Prices tumbled since December 4, when the OPEC oil exporters' group refused to put a limit on the amount it produces, despite a supply glut, anaemic demand and a slowing global economy.

"While the global oversupply has been persistent, expanding US supplies on warmer weather and low heating demand is putting a further downward pressure on oil," Kang Yoo Jin, a commodities analyst at NH Investment & Securities, told Bloomberg News.

"As the market generally expects another rate increase in March, oil prices will most likely stay low at least until the first quarter." The Fed's widely expected decision to lift interest rates for the first time since 2006 also weighed, with the dollar ticking up against most rivals, making oil more expensive to customers using weaker currencies.

However, the bank's boss Janet Yellen said she had been surprised by "the further downward movement in oil prices" and expected them to stabilise before edging up.

Analysts said there was some support from US lawmakers' decision to pas a bill Wednesday to lift a four-decade ban on oil exports as part of a massive government spending overhaul.

Crude exports were banned in 1975 as prices skyrocketed in the wake of the Arab oil embargo.

"A lifting of the export ban could narrow the spread between WTI and Brent, by providing the international market with a substitute for oil from current main supplying regions," said Sanjeev Gupta, head of the Asia-Pacific Oil and Gas practice at professional services organization EY.

AFP