Oil trading down near $76 amid weak US crude oil demand

Oil prices are currently trading down near $76 a barrel early on Wednesday in Asia as investors mulled whether signs of a sluggish US economy and weak crude oil demand justified a further sell off this week.

Benchmark crude oil futures for January delivery was up 24 cents to $76.27 a barrel at midday Singapore time in electronic trading on the NYMEX, while in London, Brent crude oil futures for January delivery rose 32 cents to $76.78 on the ICE Futures exchange.

Crude has fallen about 7 percent since reaching its high this year of $82 a barrel last month amid evidence economic recovery in the US will be tepid.

The US Commerce Department on Tuesday revised down third quarter gross domestic product growth to 2.8 percent from 3.5 percent, a disappointing result since economies emerging from recessions often see larger expansions and US crude oil demand also appears to be stagnant as oil supplies keep growing.

Crude inventories jumped more than expected last week, the American Petroleum Institute said late Tuesday. Crude stocks rose 3.3 million barrels while analysts had expected a rise of 1.4 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. The Energy Information Administration plans to announce its inventory report later Wednesday.

Some analysts, however, expect oil prices to rebound as investors seek an inflation hedge amid a weakening US dollar. Bank of America Merrill Lynch forecast an average price of $85 a barrel next year.

“Loose monetary policy and a weaker dollar should put upward pressure on crude oil prices next year,” the bank said in a report. “In addition to the monetary factors, a stronger than expected cyclical rebound in the global economy should lead to tighter physical oil supply and demand fundamentals next year.”

Tags:  demand, oil prices, US crude oil