Oil prices fell on Monday, with U.S. crude dropping nearly 3 percent to a six-year low as the dollar hit fresh highs and spare oil storage capacity runs low around the world. U.S. crude fell to $43.57 in early trading, its lowest since March 2009, before rebounding to $44.34 by 0335 GMT, still down almost half a dollar since its last settlement. Brent was trading at $54.32 a barrel, down 35 cents.
Traders said the price falls were due to diminishing spare capacity to store excess oil as well as the strong U.S. dollar. China has been taking advantage of low prices to build up its strategic petroleum reserves (SPR), which have pushed its imports to record highs despite slowing economic demand, but analysts say new spare capacity will only become available later this year, denting near-term import needs.
“While the low crude oil prices are expected to incentivize crude stockbuild (in China), stockpiling activities at the SPRs this year will remain constrained by available spare capacity,” said Wendy Yong, analyst at energy consultancy FGE. “However, in anticipation of the start-up of another SPR site this year, crude imports could pick up later this year,” she added.