Oil prices fall on higher US crude supplies

December 26, 2014 | 10:03

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World oil prices on Wednesday (Dec 24) resumed their downward trajectory after data showed a large increase in US oil supplies.

A motorist filling up petrol at a pump kiosk. (AFP/Fadel Senna)

NEW YORK: World oil prices on Wednesday (Dec 24) resumed their downward trajectory after data showed a large increase in US oil supplies.

US benchmark West Texas Intermediate for February delivery dropped $1.28 to $55.84 a barrel on the New York Mercantile Exchange. Near 1900 GMT, European benchmark Brent oil for February delivery fell $1.70 to $59.99 a barrel in London.

Wednesday's declines came in a holiday-shortened session dominated by a US Department of Energy inventory report that analysts described as bearish. The report showed crude stocks grew by 7.3 million barrels, while gasoline and distillate stocks also grew sharply.

"The inventory report this week seems to have reawakened the market's fears of tepid fuel demand and excess supply," said Gene McGillian, broker and analyst at Tradition Energy. "It underlines the weak nature of the market."

McGillian said the increase in gasoline supplies suggests the big drop in prices at the pump has not translated into much additional driving.

"In the US, we have a lot of oil around, and I don't really see any evidence that this crater in prices has boosted demand significantly yet," he said. "We're going to be watching to see if that starts to happen."

Oil prices have fallen about 50 per cent since June on mounting supplies due to increased production and lacklustre global economic growth.

The decline accelerated in late November when the Organisation of the Petroleum Exporting Countries (OPEC) decided against cutting output to respond to the drop in prices.

AFP

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