Oil has dropped 11 percent this week on concern a deepening recession will cut fuel demand in the world’s largest energy consumer. U.S. crude stockpiles rose more than expected last week to the highest since May. Crude earlier rose on signs that OPEC is fulfilling supply cuts announced last month, and as continued fighting in the Gaza Strip heightened Middle East political tensions.
Crude oil for February delivery fell as much as 83 cents, or 2 percent, to $40.87 a barrel on the New York Mercantile Exchange. It traded at $40.92 at 11:05 a.m. London time.
Futures earlier rose as much as 2.4 percent to $42.70 a barrel on further evidence the Organization of Petroleum Exporting Countries is reducing production to comply with output cuts agreed at a Dec. 17 meeting in Algeria
Saudi Arabia sent notices to refiners in Japan and Taiwan that it was cutting shipments for February by 10 percent, said two refinery officials. This follows similar notification from members including Venezuela, Kuwait and the United Arab Emirates.
U.S. crude-oil stockpiles rose 6.68 million barrels to 325.4 million barrels last week, the Energy Department said Jan. 7 in a weekly report. Supplies at Cushing, Oklahoma, where oil that’s traded on Nymex is stored, climbed 14 percent to 32.2 million barrels, the highest since at least April 2004, when the department began keeping track of supplies there.
Brent crude for February settlement fell as much as 59 cents, or 1.3 percent, to $44.08 a barrel on London’s ICE Futures Europe exchange. It was at $44.33 a barrel at 11:31 a.m. local time. The contract yesterday fell 2.6 percent to settle at $44.67 a barrel.
The gain in stockpiles has caused the price of oil in New York to trade at a discount to Brent crude. West Texas Intermediate, the grade that is the physical basis for the New York contract, normally trades at premium to the European type.
The price of Brent oil is $3.21 a barrel higher than crude traded in New York. The difference provides an incentive to traders to divert oil from Africa, the Middle East and other sources to European ports.
Israeli warplanes pounded Hamas targets in the Gaza Strip and militants from the Islamic group fired rockets into Israel just hours after the United Nations Security Council called for an immediate cease-fire. Iran, the second-largest OPEC nation and a supporter of Hamas, has called for producers to boycott Israel’s allies.