Oil edges down towards US$36 in thin trading

SINGAPORE – Oil fell more than one per cent towards US$36 a barrel yesterday in holiday-thinned trading, erasing some of the late gains made last week on short covering, with worries about weakening oil demand again at the forefront.

A ceasefire between Israeli forces and Hamas in Gaza, together with the resolution of a gas row between Russia and Ukraine, eased supply fears that had helped put a floor under falling prices.
Activity was thin with the US closed for the Martin Luther King Holiday and ahead of expiry of the February Nymex contract tomorrow.
US light crude for February delivery , which expires today, slid 45 cents to US$36,06 a barrel, with only 345 lots traded, having settled up three per cent on Friday at US$36,51 on short-covering in pre-holiday trade.
The March contract was more actively traded with 2 024 lots changing hands, and fell 31 cents to US$42,26.
London Brent crude fell 27 cents at US$46,30.
‘The combination of drastic supply cuts with continuing global economic turmoil leading to receding consumer demand will certainly inject uncertainty, and thus volatility, into the energy markets for some time to come,’ Jonathan Kornafel, Asia Director of US-based options house Hudson Capital Energy, said in a report.
The International Energy Agency, a leading energy watchdog, cut its estimate for 2009 demand by 940 000 barrels per day to 85,3 million bpd, a fall of about 500 000 year-on-year on Friday as the economic slowdown erodes consumption.
Acknowledging the gloomy market situation, Iran’s Oil Minister Gholamhossein Nozari was quoted as saying on Saturday that his Ministry anticipates a crude oil price of about US$40 a barrel in 2009.
Falling prices could prompt Opec to consider reducing output again, Algeria’s energy and mines minister Chakib Khelil said on Saturday, adding that he expected a sharp decline in oil demand in the second quarter this year. -Nampa-Reuters