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Oil falls sharply

Written by Business World, on 19th Feb 2015. Posted in Economy

article headlineOil prices tumbled on Thursday as U.S. inventories were expected to hit record highs, while a possible rise in Saudi output stoked new worries about oversupply. U.S. crude stocks rose by 14.3 million barrels last week, data by industry group the American Petroleum Institute showed after Wednesday's settlement, compared with analyst expectations of an increase of 3.2 million barrels. If U.S. Energy Information Administration data due at 1600 GMT confirms the large build, it would be the biggest weekly addition in barrels since data became available in 1982. Benchmark Brent crude futures for April fell below $60 a barrel, trading at $59.36 a barrel, down $1.17 by 0744 GMT, extending declines from Tuesday's two-month high of $63. Trading was quiet in Asian hours as markets in China and other nations are closed for the holidays. U.S. crude for March delivery, which expires on Friday, was down $1.69 at $50.45 after dropping as much as 3.7 percent to an intraday low of $50.23 earlier. "U.S. shale production has not budged, resulting in swelling inventories," said Ken Hasegawa, commodity sales manager at Tokyo's Newedge Japan. "Global production does not seem to be falling much, either, except some hitch in Libya output." Oversupply could still worsen before a balanced market emerges, because the lower U.S. rig counts will only result in cuts in American output later this year. "Crude oil prices declined on concerns that the recent rally is overdone amid a continuing supply glut. The price rise of 34 percent since mid-Jan has largely been fuelled by cuts to capital spending and falling U.S. rig counts, which have yet to result in a fall in near-term production," ANZ bank said. Meanwhile, production from world's biggest exporter Saudi Arabia may be increasing to near 10 million barrels per day, consultancy PIRA said on Wednesday. Amid lower oil prices, state oil company Saudi Aramco is talking to banks about taking a $10 billion loan for general business purposes, according to banking sources. On the demand side, crude imports by Japan fell 7.2 percent last month from a year earlier. Its overall exports jumped, however, helping to lift Asia's No.2 economy out of recession. The API and EIA data reports are a day late this week because of a U.S. holiday on Monday. (Reuters) For more visit: www.businessworld.ie

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