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UPDATE 3-Oil extends decline after crashing on inventory concerns
February 5, 2015 / 5:54 AM / 3 years ago

UPDATE 3-Oil extends decline after crashing on inventory concerns

* U.S. crude stocks rose more than expected last week

* China takes step to pour fresh liquidity into its economy (Updates prices)

By Jacob Gronholt-Pedersen

SINGAPORE, Feb 5 (Reuters) - Oil prices fell on Thursday, extending big losses logged in the previous session as record high inventories in the United States coupled with concern over global demand cut short a four-day rally.

Oil markets remain highly volatile, with U.S. crude losing 9 percent on Wednesday in one of its biggest routs. In the previous four sessions, prices had rallied almost 19 percent from their lowest in nearly six years.

Brent crude for March delivery dropped 77 cents to $53.39 a barrel by 0735 GMT, after reaching a session high of $55.01 then falling more than $1 at one stage. The contract had settled $3.21 or 5.5 percent lower on Wednesday.

U.S. crude traded 67 cents lower at $47.78 a barrel, having also traded down more than $1. Earlier in the session, the contract climbed above $49 a barrel, after slumping on Wednesday on the large build-up in U.S. inventories.

U.S. 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.

Rising stockpiles come as seasonal demand is expected to fall in the second quarter as refineries enter spring maintenance.

“As weak fundamentals re-emerge in crude oil markets, further downside risk to oil prices is likely to persist,” analysts at ANZ said in a note.

Prices initially rose on Thursday on optimism that steps by China’s central bank to pour in fresh liquidity by lowering banks’ reserve requirements would spur demand for energy there.

Crude prices began to rise last week from near-six-year lows, in part due to a reported downturn in U.S. 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.

“The resulting drop in demand for crude at refineries is likely to lead to further large crude inventory builds,” BNP Paribas said.

A workers’ strike in the United States at nine plants, including seven refineries accounting for 10 percent of the country’s refining capacity, added to concerns over demand. Negotiations continued over a new wage contract with lead oil company negotiator Royal Dutch Shell Plc. (Editing by Alan Raybould, Tom Hogue and Prateek Chatterjee)

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