By ALEX KENNEDY / AP WRITER | SINGAPORE — Oil prices lingered near $36 a barrel Thursday in Asia, following a steep fall overnight, as surging crude inventories in the US stoked investor concern that consumer demand will continue to fall amid a deep recession.
 Oil rigs just south of town extract crude for Chevron at sunrise in Taft, California. (Photo: AFP) |
US crude oil inventories have jumped in recent weeks as rising unemployment erodes spending on gasoline.
A weekly report Wednesday from the Energy Information Administration showed that crude inventories jumped by 4.7 million barrels for the week ended February 6, more than an increase of 3.4 million barrels expected by analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.
Including last week's build up, crude inventories have swelled by more than 30 million barrels in the past six weeks.
"Conditions in the West and globally remain quite weak," said Gerard Burg, minerals and energy economist with National Australia Bank in Melbourne. "Given the economic outlook, there's little to drive prices higher."
Forecasters continue to lower their expectations for crude demand. The Paris-based International Energy Agency said Wednesday that global oil demand in 2009 will likely be 84.7 million barrels per day, 570,000 barrels less than the previous estimate.
"It's still a market that's really focused on demand," Burg said. "I think there's potential for conditions to weaken further."
Investors are also skeptical that a Treasury Department plan announced earlier this week to spend more than $1 trillion to help remove banks' soured assets from their books and unclog the credit markets will work.
"The bank plan lacked specifics, and the market is quite concerned that it won't kick start the economy," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore.
Falling prices may eventually trigger a recovery in the medium-term, as producers could reduce supply from high-cost oil fields that have become unprofitable.
"I think the cost of production is going increasingly become an issue," Burg said. "If it becomes unprofitable, most producers would seek to cut back."
In other Nymex trading, gasoline futures rose 1.05 cents to $1.28 a gallon. Heating oil gained 0.95 cent to $1.33 a gallon, while natural gas for March delivery jumped 2.7 cents to $4.56 per 1,000 cubic feet.
In London, the March Brent contract rose 37 cents to $44.65 on the ICE Futures exchange.
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