A further increase in US crude inventories and forecasts of steeply declining global oil demand have again dragged down oil prices in New York. The price of the benchmark West Texas Intermediate (WTI) crude fell as low as US$34.46 a barrel yesterday, despite Wednesday's deal in the US Congress approving a $789 billion (Dh2.89 trillion) economic stimulus package. But a government report showing US oil stocks at their highest level since June 2007, up 17 per cent from a year ago, trumped news of the proposed federal spending and tax-cut measures. The US energy department said the nation's refineries operated at 81.6 per cent of capacity last week, the lowest level since early October when the US Gulf coast was recovering from two hurricanes.
"Demand is still weak and US inventories are rising, so clearly there is oversupply in the market," said Eliane Tanner, an analyst at Credit Suisse Group. The latest drop in the WTI price, widening its discount to Europe's Brent crude to about $10 a barrel, also followed the latest downwards revision by the International Energy Agency to its oil demand forecast. The Paris-based energy adviser to developed oil-consuming countries yesterday projected a 980,000 barrel per day (bpd) drop in global demand this year, representing the biggest annual decline in 27 years. In a separate forecast, the energy consultant Wood Mackenzie yesterday predicted that global oil demand would fall by 1.5 million bpd, or 1.7 per cent, to 84.3 million bpd this year. Trade data showing a sharp drop in Chinese exports last month deepened convictions that oil prices could be stuck in a rut for some time. "We need at least another two years to make the price of oil $70 to $75," said Falah al Amiri, the head of Iraq's State Oil Marketing Organisation, which is responsible for selling the country's oil to international markets. "China has a huge impact on the international market." Mr Amiri, an OPEC governor, also said it would be difficult to deal with surplus oil inventories that have built up internationally in recent months. He predicted the stockpiles would increase if the global economy deteriorated further. In Cushing, Oklahoma, the delivery point for crude oil traded on the New York Mercantile Exchange, stocks climbed to a record 581,000 barrels last week, accounting for the unusually wide price spread between WTI and Brent. The European benchmark crude gained ground yesterday, rising as high as $46.19 a barrel after Royal Dutch Shell said a worsening security situation might force it to suspend shipments of Nigerian oil. On the Dubai Mercantile Exchange, the futures contract for Omani crude settled yesterday at $44.98. In the US, natural gas prices have also been affected by the country's deepening recession. Most recently, they have been driven down by fears that production from new fields in Texas could create a lasting supply glut.