Oil hits eight-week low

Crude prices extend losing streak as growing supplies outweigh worries of rising global demand.
April 18, 2005: 7:43 AM EDT


LONDON (Reuters) - Oil prices extended a slide Monday, striking an eight-week low under $50 a barrel as growing supplies outweighed worries of rising global demand.

U.S. light crude for May delivery traded as low as $49.66 a barrel, the lowest since Feb. 22, before recovering to $49.91, down 58 cents. Brent crude fell $1.01 to $50.60.

U.S. crude oil prices have fallen around 14 percent from an all-time peak of $58.28 hit two weeks ago, driven by swelling crude stocks and signs of slower Chinese demand growth.

"People who bought in at the highs are probably getting a bit nervous now," said David Thurtell, Sydney-based commodities strategist with the Commonwealth Bank of Australia.

"U.S. stocks are building pretty comfortably... I guess you wouldn't rule out prices getting to $47 or $48 over the next couple of weeks."

OPEC President Sheikh Ahmad al-Fahd al-Sabah said the producers' cartel was likely to postpone an increase in output quotas until the group's next meeting in June, but raise crude supply next month anyway.

Sheikh Ahmad, Kuwait's energy minister, also said he believed prices were almost at a fair level.

Qatar's energy minister went further, saying OPEC should be careful not to let stockpiles build too fast.

"We see inventories building up higher than in 2002. It shows we have to be careful that inventories are not in a position to threaten oil stability, Abdullah al-Attiyah told Reuters in an interview.

U.S. commercial oil inventories are at their largest since summer 2002.

The Organization of Petroleum Exporting Countries raised formal output limits last month by 500,000 barrels per day (bpd) to 27.5 million bpd in response to the rapid rise in prices, and left room for another 500,000-bpd increase before the June 15 talks if prices failed to drop below $55.

A government report released on Friday showed non-commercial crude oil speculators cutting their net bet on higher prices in the week ended April 12 by a little over 29,000 lots to 59,650.

Speculators had held a record 88,712 net long in the previous week.

The recent strengthening of the U.S. dollar has encouraged funds to take profits on commodities globally. Copper slid to a two-month low last week, while zinc and aluminum also fell heavily.

Despite the latest retreat, U.S. oil prices are still 15 percent higher than at the end of 2004, with many institutional investors still keen to bet that demand in the United States and China, the world's biggest consumers, will keep producers and refiners working at full throttle.

Finance ministers from the Group of Seven industrialized nations meeting in Washington over the weekend said record oil prices were a "headwind" facing the global economy but said the outlook for economic growth was healthy.

"The global expansion has remained robust, and the outlook continues to point to solid growth for 2005," the G7 said in a statement issued after the meeting.