London (Platts)--16Jan2008

Global crude futures extended Tuesday's selling spree during European
morning trading on Wednesday ahead of the release of latest weekly US stock
data later on today.
Ongoing fears of an economic slowdown in the US, coupled with
expectations for US stock builds and weaker demand as well as bearish
technicals and gloomy results from major investment banks saw petroleum
futures prices heading south on Tuesday, with losses extended on Wednesday,
sources said.
At 10:51 London time, the front-month February ICE Brent futures
contract, due to expire at the end of trading Wednesday, lost 93 cents to
$90.05/barrel, while February NYMEX WTI declined $1.23 to $90.67/b, with both
contracts trading at their lowest levels since mid-December 2007. Moreover,
WTI's premium over Brent also narrowed further, currently seen at 62 cents/b.
"The continuous selloff is mainly down to fears of an economic slowdown
in the US. Adding to that are the anticipated builds in US petroleum stocks,
the IEA report showing slightly reduced demand figures and the lack of
geopolitical headlines," a London-based broker said.
US retail sales for December fell 0.4%, according to data from the Census
Bureau, while the Empire State Manufacturing survey showed conditions little
improved in January, according to the New York Federal Reserve Bank. By
contrast to weak retail sales and the manufacturing survey, the PPI for
December was in line with market expectations, down 0.1% for the headline
number, but up 0.2% for the core, excluding food and energy.
Looking at US stock expectations, analysts surveyed by Platts expect a
1.2 million barrel build when the Energy Information Administration and the
American Petroleum Association release weekly data later today. Additionally,
product stocks are seen up as well, with gasoline inventories forecast to have
build 2.7 million barrels, while distillate stocks are expected up 1.8 million
barrels.
Meanwhile, the International Energy Agency Wednesday cut its estimate of
world oil demand growth for 2008 to 1.98 million b/d, down 130,000 b/d from
its previous forecast. The agency said it was waiting for new assessments of
the health of the US economy from the International Monetary Fund and the OECD
before making any revisions to its oil demand forecasts in the country.
"The overall picture for the US is just looking bleak...technicals are
weak, so are US stats expectations and IEA demand forecasts...additionally,
results for Citigroup were horrible yesterday and it is likely that other
banks will follow, adding to the downward trend," a London-based trader said.
"There is loads of uncertainty in the market...At this point, it is just
about going short and staying short," the trader added. Looking at product
futures, the downward movement continued, with February ICE gasoil losing
$8.25 to $790.25/mt, while in the US, February NYMEX heating oil lost 2.42
cents to $2.523/gallon.
February NYMEX RBOB, one of the leaders of Tuesday's selloff, declined
2.99 cents to $2.2793/gal.
--Verena Peternell, verena_peternell@platts.com