Oil extends losses as World Bank cuts growth forecast

Reuters , Wednesday 14 Jan 2015

Oil prices fell 1 percent on Wednesday after the World Bank cut its economic growth forecast, helping extend a rout that saw prices touch a nearly six-year low the previous session.

Oil and other commodities came under pressure after the weaker outlook from the Washington-based financial institution reinforced worries of a gloomy economic outlook at a time when oil markets are plagued by oversupply.

"The global economy is running on a single engine ... the American one," World Bank chief economist Kaushik Basu said. "This does not make for a rosy outlook for the world."

February Brent crude LCOc1 dropped 55 cents to $46.04 a barrel by 0927 GMT and West Texas Intermediate crude for February CLc1 was at $45.29, down 60 cents.

"There's clearly a souring of sentiment towards industrial commodities and I think that's spilling over to oil today," said Michael McCarthy, chief strategist at CMC Markets in Sydney.

"Potentially this selling is now being overdone, but today there's no sign of a turnaround," he said.

Analysts said prices would stay under pressure as oversupply hurts both WTI and Brent, and a string of them have cut price forecasts for 2015 and 2016.

Oil had tumbled nearly 5 percent on Tuesday before closing down 1.8 percent, with global benchmark Brent briefly trading at par to U.S. prices for the first time in three months as some traders moved to take advantage of ample U.S. storage space.

U.S. stocks are possibly approaching 80 percent of capacity by the upcoming spring season, according to U.S.-based PIRA Energy Group.

Commercial crude stockpiles in the U.S. rose 3.9 million barrels last week, the industry group American Petroleum Institute (API) said. The Energy Information Administration's oil inventory report is due Wednesday at 1530 GMT.

Outside the United States, some of the world's biggest oil traders have booked supertankers to store at least 25 million barrels at sea.

"Once floating storage starts, there is very little support on the downside for Brent spreads," analysts Energy Aspects said.

With oil producer club OPEC deciding late last year to maintain its output despite slowing Asian and European economic growth, a glut has also appeared outside the United States.

"The closing gap looks to be solidifying Saudi Arabia's strategy to curb shale production and protect market share," ANZ bank said.

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