Prices of petrol, diesel, LPG and jet fuel are headed downhill as worldwide prices of oil fell to a 12-year low on Thursday with the Indian basket of crude imports coming down to $31.33 per barrel.
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West Texas Intermediate for February delivery rose as much as $1.07 to $34.34 a barrel on the New York Mercantile Exchange and was trading at $33.98 at 2:14 p.m. Hong Kong time.
In London, European benchmark Brent North Sea crude oil for February fell 48 cents (1.4 per cent) to US$33.75 a barrel. The Organization of Petroleum Exporting Countries effectively abandoned output limits a year ago, adding to the global glut.
The EIA (U.S. Energy Information Administration) estimates that WTI crude oil prices could average $51 per barrel in 2016.
In more downbeat news, the World Bank lowered its global economic growth forecasts citing emerging market weakness, which cast doubt on the strength of future oil demand, dealers said.
“Companies have done a good job but oil prices have dropped so quickly they haven’t been able to adjust quickly enough”, Salem said.
New numbers showed the Chinese service sector growing at its lowest level for 17 months, while a fifth consecutive month of weaker manufacturing data led to a 7% fall in equity prices in Shanghai on Monday. United States government data showing an unexpected 5.1 million-barrel fall in crude stocks last week was overshadowed by a 10.6 million-barrel surge in gasoline supplies, the biggest build since 1993. “For sure, a minus 7 percent for oil over two days on just China, and a blowup of the whole macro trade, was not something I was expecting to see in the first two days of the year”. “The rise in gasoline and distillate inventory more than offset the fall in crude oil inventory levels by 5.09 million barrels to (still near record) 482.3 million barrels last week”, ANZ bank said.
The Fed’s goal is to keep inflation at close to 2% – some members of the Open Market Committee expressed “significant concern about still-low readings on actual inflation” and “uncertainty and risks present in the inflation outlook”, according to the minutes.
At the same time, demand is slowing, especially in Asia where the biggest economy and energy consumer, China, is seeing the slowest economic growth in a generation.
Brent futures were down $1.84 a barrel at $34.58 a barrel at 12:50 pm EST (1750 GMT).
In the near term, though, the prospect of more barrels from Iran is looming over the market.
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Oil prices have shrugged off rising tension between Iran and Saudi Arabia as supplies continue to outstrip demand.
