The S&P TSX index was down 0.19 per cent, or 23.33 points, to 12,147.08 in early trading. “I think today’s inventory report is all about products…The long awaited massive decline in crude production is not starting again”, said Dominic Chirichella, senior partner at Energy Management Institute in NY. China’s trade improved in December, U.S. job creation has remained strong, and Australia, which is one of the countries highly vulnerable to China’s slowdown, reported another month of strong jobs growth in December. The loonie was at 69.64 cents, down 0.07 of a US cent from the currency’s previous close in Toronto. The contract is down about 21 per cent from a 2016 high on January 4.
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The Dow Jones industrial average fell 364 points, or 2.2 percent, to 16,151.
U.S. gasoline inventories are at their highest seasonal level for more than a decade, with demand for the transport fuel over the last four weeks dropping 4.3% compared with the previous year. It rose to 9.2 million barrels a day last week, EIA data shows. USA and European officials have said it could be just days away.
While the supply and demand factors that have driven prices almost 18 per cent lower this year are a concern, and are hurting exporters and energy company shares, lower oil and gas costs are a boon for many resource-scarce Asian economies.
Before rebounding, global crude benchmark Brent broke below $30 a barrel for a second straight day. Earlier on Friday, it fell to $29.43, the lowest since February 2004. Brent crude, a benchmark for worldwide oils, fell 29 cents to $29.99 a barrel in London.
“Lower prices in the overall market make people nervous”, said Keith Lerner, chief market strategist for SunTrust Bank, adding that some investors may be taking more conservative stances with their portfolios after watching stocks have a rough start to the year. A United Nations nuclear watchdog appeared likely to confirm by Friday that Iran has curtailed its nuclear program, paving the way for sanctions to be lifted against its oil. Secretary of State John Kerry said on Wednesday the core of the reactor had been removed.
But bearish sentiment returned as markets expect Iran will finally see western-imposed sanctions lifted over the weekend.
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“In the very short term, another price drop can not be excluded in particular after sanctions against Iran are being lifted”, Commerzbank analyst Carsten Fritch told Reuters Global Oil Forum.
