Brent oil price trading around $78, looking to US data

Brent crude oil futures price is trading slightly lower in Asian on Friday, as high crude oil inventories continued to weigh amid doubts about global economic recovery, together with uncertainty in the latest US employment data due out later today.

January Brent crude oil futures on London’s ICE Futures exchange fell 21 cents to $78.15 a barrel at the close of trading on Thursday. “As far as today goes, all eyes will be on November’s unemployment rate, which the crowd forecasts at unchanged, 10.2%,” said Stephen Schork in The Schork Report.

Recent data from the US continued to reflect weak demand in the world’s largest energy consumer, and a widening crude futures contango makes increased crude storage very likely.

Normally, an expanding contango would drive outright crude values sharply lower, possibly into the $65-$70-a-barrel zone, but with supporting financial factors, “sustaining downside crude price moves in the face of aggressive hedge fund buying interest is proving to be an arduous process,” said Jim Ritterbusch of Ritterbusch and Associates.

The oil market was also pressured by the Institute for Supply Management report yesterday that said its service industry index for November fell to 48.7, from 50.6 in October, indicating a contraction in the industry, in contrast to an expansion predicted by economists.

Crude oil prices remain rangebound between $75 and $80 a barrel, but analysts say charts indicate a bearish scenario. The latest US inventories data wasn’t good enough to say with confidence that economic recovery is gaining steam, said Phil Flynn of with PFGBest. “In fact they say we may be going back in the other direction.” Unless demand picks up quickly, “I would say these numbers indicate that the economy has hit a plateau and runs a real risk of contracting again,” he said.

Tags:  brent oil price, oil inventories, US data