Crude Oil Slumps 5.3% Ahead Of Official Supply Data

(RTTNews) - U.S. crude oil snapped a three-day gain to end sharply lower on Tuesday, ahead of the official weekly U.S. crude stockpile report from the Energy Information Administration due Wednesday, with the International Energy Agency warning that global supplies will continue to rise.

The IEA said OPEC's oil inventories may come close to the all-time high of 2.83 billion barrels in the middle of 2015. OPEC is refusing to consider a cut in production, hoping to cripple non-OPEC competition with low oil prices.

"A partial rebound in oil prices over the last month following a 60 percent crash since June suggests market participants are seeing light at the end of the tunnel and growing confident that spending cuts by oil companies will lead to a market recovery," the IEA said.

However, "supplies so far remain abundant, and it will take time for investment cuts to make more than a relatively small dent on production," the IEA warned.

The IEA said it sees London's Brent oil, currently at $58 a barrel, averaging only $55 a barrel in 2015. Prices should go up from there, the IEA predicts, up to $73 by 2020.

"The market does not seem to be expecting prices to revisit earlier highs anytime soon. Not only have prompt prices collapsed, even price expectations for the back end of the curve have been significantly downgraded," the agency said.

Light Sweet Crude Oil futures for March delivery, the most actively traded contract, plunged $2.84 or 5.3 percent to settle at $50.02 a barrel on the New York Mercantile Exchange Tuesday.

Crude prices for March delivery scaled a high of $52.65 a barrel intraday and a low of $49.91.

On Monday, crude oil settled sharply higher at $52.86, up $1.17 or 2.3 percent, after the Organization of the Petroleum Exporting Countries raised its demand growth forecast for the year, even as supply glut worries eased with U.S. rig counts continuing to drop.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 94.72 on Tuesday, down from its previous close of 94.51 late Monday in North American trade. The dollar scaled a high of 94.88 intraday and a low of 94.40.

The euro trended lower against the dollar at $1.1311 on Tuesday, as compared to its previous close of $1.1326 late Monday in North American trade. The euro scaled a high of $1.1347 intraday and a low of $1.1275.

On the economic front, a Commerce Department report on Tuesday showed U.S. wholesale inventories edged slightly higher in December, after having reported a notable increase last month. Wholesale inventories inched up by 0.1 percent in December after climbing by 0.8 percent in November. Economists expected inventories to edge up by 0.2 percent.

Chinese inflation slowed to a five-year low in January on easing food inflation, providing space for the central bank to adjust monetary policy to support weakening economic growth. Inflation eased more-than-expected to 0.8 percent in January from 1.5 percent in December, the National Bureau of Statistics said Tuesday. This was the lowest since November 2009. The annual rate was seen at 1 percent.

Producer prices in China witnessed the biggest fall since late 2009, slipping 4.3 percent year-on-year following a 3.3 percent drop a month ago, exceeding the 3.8 percent drop economists expected.

U.K. industrial production declined more-than-expected in December as maintenance work in the North Sea fields dragged oil output, while the manufacturing sector managed to expand, albeit at a slower pace. Industrial production fell 0.2 percent from the prior month, after staying flat in November, the Office for National Statistics said Tuesday. It was expected to fall by 0.1 percent.

Meanwhile, unemployment rate across member nations of the Organization for Economic Cooperation and Development dropped to 7.1 percent in December from 7.2 percent in November. In the euro area, the jobless rate slid marginally to 11.4 percent from 11.5 percent in November. The unemployment rate in the United States declined to 5.6 percent from 5.8 percent.

French industrial output recovered at a stronger than expected pace in December, data from the statistical office Insee showed Tuesday. Industrial production advanced 1.5 percent in December from November, when it was down 0.2 percent. Economists had forecast industrial output to grow only 0.3 percent.