Oil Trades Below $74 as Demand Concerns Outweigh Stockpile Drop

28/01/2010 00:00 AST

Oil traded below $74 a barrel as concerns about falling demand in the U.S., the world’s biggest energy consumer, outweighed a report yesterday showing crude stockpiles fell last week.

Crude supplies had an unexpected decline of 3.89 million barrels, the U.S. Energy Department said yesterday. That was not enough to push the market higher as both gasoline and distillate supplies climbed. The amount of petroleum products delivered by refiners over the past four weeks, a proxy for demand, fell to 18.753 million barrels a day, down 3.4 percent from last year.

“The fundamentals are still weak and nothing suggests to me that demand will pick up tremendously,” said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. “People were expecting a draw in distillate supplies and it turns out it’s a build so that took some of the heat out of the crude draw.”

Crude oil for March delivery was at $73.61 a barrel, down 6 cents, in electronic trading on the New York Mercantile Exchange at 10:43 a.m. Singapore time. The contract earlier gained as much as 41 cents, or 0.6 percent, to $74.08 a barrel. Yesterday, it fell $1.04 to $73.67, the lowest settlement since Dec. 21.

Futures had fallen 1.4 percent yesterday after gasoline supplies climbed 1.99 million barrels to 229.4 million last week, the highest level since March 2008, the Energy Department report said. Distillate stockpiles, a category that includes heating oil and diesel, rose 358,000 barrels.

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Bloomberg