Oil slid to below $79 a barrel today on a stronger dollar, tighter Chinese credit policy and expectations that refiners at top consumer the United States processed less crude.
Chinese banking authorities have instructed some major banks to stop new lending for the rest of January after loan growth surged in the first few weeks of the year, official media and banking sources said on Wednesday.
Crude inventories in the United States rose for a third straight week last week as refinery utilisation fell as the maintenance season begins and imports increased, a preliminary Reuters poll of analysts showed.
"If refinery runs go up, it means that they are turning that crude into products, but that is not happening," said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore.
"Refinery runs are actually down, so they are storing the crude somewhere."
US crude for February delivery shed 40 cents to $78.62 a barrel at 3.16am on its last day as the front-month NYMEX contract. March crude also declined 40 cents to $78.92. London Brent for March fell 42 cents to $77.21.
A stronger dollar also weighed on crude prices. The euro fell to its lowest level in five months against sterling and its weakest level in four months against the dollar after triggering stop losses.
"The inverse relation between the dollar and crude has been pretty strong during Asian trading hours," Mr Chu said.
Prices yesterday hit their lowest this year at $76.76 for front-month US crude futures before rising to above $79. They had touched a 15-month high near $84 on January 11th.
US inventory reports this week are due out a day later than usual because of Monday's Martin Luther King Jr holiday. The American Petroleum Institute will issue its industry report later today at 9.30pm. The Energy Information Administration will publish government data tomorrow at 4pm.
US crude stockpiles were expected to have gained 2.5 million barrels on average the week ended January 15th, a survey of eight analysts showed.
Distillate stocks were projected up 400,000 barrels, with heating oil demand expected to have fallen amid moderating winter temperatures in the US Northeast. Gasoline stocks probably rose 1.9 million barrels.
The country's refinery utilisation was forecast to have fallen 0.3 percentage point to 81.0 per cent of capacity.
Some US refineries have begun their first-quarter maintenance, with the goal of retooling for gasoline production ahead of the summer driving season.
China's move to limit credit could be interpreted as further tightening of Chinese monetary policy. Higher reserve requirements for Chinese banks last week pulled commodity prices lower as traders anticipated the phasing out of economic stimulus measures.
Still, Chinese industrial production probably grew at its fastest pace in almost four years, jumping by 20 per cent in the year to December compared to a reading of 19.2 per cent in November. China's December economic indicators will be published tomorrow at 2am.
Reuters
