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Oil Above $90 on Shortage Concerns

Oil steadied above $90 Tuesday, as a workers' strike at five French oil refineries stoked concerns of fuel shortages.

Oil Pipeline
Oil Pipeline

U.S. light crude for January delivery, which expires later on Tuesday, fell 14 cents to $90.49 a barrel, falling for the fourth straight session on worries that troubles with the US economy could hurt demand.

London Brent crude fell 88 cents at $90.41.

Workers at French oil and gas company Total voted to extend a work stoppage by another day at four French refineries that have been on strike since late Monday over a pay dispute.

The strike had helped push oil prices higher as supply of fuel from the refineries was blocked or reduced and production lowered.

"Of the five refineries on strike only the (119,000 bpd) Feyzin voted to restart work," a senior union official said. "The others have extended their action by another 24 hours."

Oil prices had climbed as much as $2 earlier in the session on news that Turkish troops had crossed the border overnight to combat Kurdish militants, sheltering in the semi-autonomous region in northern Iraq.

Iraqi Kurdish government said Turkish troops have since left, prompting oil prices to pare gains.

Fundamentals in Focus

Analysts said rising geopolitical concerns centred on the oil-producing Middle East had put fundamental factors such as tight fuel stocks during an intensifying winter season into sharper focus.

"The lower your spare capacity, geopolitical sensitivity is exacerbated. If something more dramatic happens given the tightening trends in fundamentals as we head into winter, I'm more than confident we could revert higher," said Harry Tchlinguirian at BNP Paribas.

Worries about supplies as the northern hemisphere headed into winter helped send U.S. crude to near $100 a barrel in late November. But reverse concerns of a possible glut, should there be a recession in top energy market the United States, have pulled prices back to $90.

Signs that the U.S. economy may be weakening are multiplying and prompting increased warnings that a recession may be around the corner.

In the shorter term oil prices could rebound later this week if weekly stocks data show a fall in crude and distillates stocks, as forecast by analysts.

U.S. crude oil inventories probably fell for the fifth week in a row last week as fog hit import deliveries at the Houston Ship Channel, a preliminary Reuters poll of industry analysts showed on Monday.

Distillate stocks, which include heating oil and diesel, were forecast to have fallen for the second consecutive week, while gasoline supplies probably rose for the sixth straight week, the survey showed.

On average, crude stocks were expected to have fallen 1.4 million barrels while distillate stocks likely declined 600,000 barrels, analysts said.