Oil dips under US$74 as shares fall

SINGAPORE: Oil fell below US$74 a barrel today, down for the first time in six days on softer Asian shares as renewed concerns over the economic recovery emerged, after reaching a 10-month high a day earlier.

Investors are looking to oil inventories in the United States for direction, with analysts calling for a draw in crude and gasoline stocks and an increase in distillates.US crude futures for October fell 53 cents to US$73.84 a barrel by 0307 GMT, after hitting their highest intraday level since October 21 at US$74.81 on yesterday. Brent crude shed 52 cents to US$73.74.

“People are waiting for (US) inventory numbers too. Market fundamentals are still weak. While crude stocks may have fallen, those for products are still high. The supply-demand balance is weak.” An initial Reuters poll showed crude inventories for the week ended August 21 fell by 900,000 barrels, much smaller than the unexpected 8.4 million-barrel draw in the week before, as imports stayed low and refinery utilisation rose.

But forecasters called for a 200,000-barrel rise in distillate stocks, while gasoline inventories could have also eased by 900,000 barrels, as demand might have improved on late summer vacation driving, which would make it the fifth-straight week of falls. Data from the American Petroleum Institute will be released at 2030 GMT on today, while the US government data is due out on tomorrow.While the race towards US$75 over the past week was spurred by the equities rally, with the Dow Jones index also briefly touching 10-month highs on Monday, oil prices were hit by falling Asian stocks today.

China’s Shanghai stock index slid more than 3 per cent after Premier Wen Jiabao said Beijing would keep its monetary policy loose as the economy faces new difficulties, including trouble boosting domestic consumption, while Japan’s Nikkei lost 0.8 per cent.Commodities markets have closely tracked equities indexes in recent months, as dealers view stocks as a lead indicator of economic performance.It is too early to say the economy is on a strong footing and it would take another six months to be sure that the recovery is on track, Astmax’s Emori said.He saw US$75 as a key resistance level.

“Over US$75, there is no reason to buy under current fundamentals.” Oil and commodities traders will be keeping their eyes on US housing, consumer confidence and retail sales data due later on today as pointers to the health of the world’s biggest economy, following upbeat remarks by the Fed chairman and a surprising rise in home sales late last week.

That news was followed by reports showing new industrial orders in the euro zone rebounded in June and US economic activity improved again in July. But as Asian shares fell, the dollar eased against the yen as worries returned over the state of US consumer confidence. - Reuters.