Crude oil prices fell by more than $1 a barrel while base metals staged a broad retreat after China took further steps to cool its economy by tightening monetary policy.
China’s central bank ordered commercial banks to increase the amount of reserves they hold for the second time in a month to cool rapid growth in bank lending that has led to concerns that asset price bubbles could be forming in the property market.
Nymex March West Texas Intermediate fell $1.16 to $74.12 a barrel while ICE April Brent lost $1.02 at $73.10 a barrel.
US weekly inventories data was due for release later in the session after being delayed from the normal Wednesday release due to severe snow in the US.
US crude stocks were expected to have risen 1.5m barrels last week, according to a poll of analysts by Reuters.
Distillate stocks (including heating oil) were seen falling 1.9m barrels following the extreme winter weather that has covered much of the US north-east.
Petrol inventories were forecast to have risen 0.5m barrels.
US refinery utilisation was expected to register a small improvement after dropping to just 77.7 per cent, the lowest on record outside of periods affected by hurricanes.
On Thursday, the International Energy Agency, the energy watchdog of the western world, raised its forecast for 2010 global oil demand growth by 120,000 barrels per day to 1.6m b/d, with worldwide consumption expected to average 86.5m b/d this year.
The IEA said demand growth this year would come entirely from emerging markets and that, in spite of an improvement in the outlook for economic growth in the developed world, expectations for oil consumption in the west had barely changed.
“Even the recent record US and European winter snows look unlikely to revive OECD demand – which remains flat at best in 2010 – an ‘oil-less’ recovery indeed,” said the IEA.
The agency said the heating oil market was undergoing a structural shift with only a handful of countries now relying on oil for heating purposes.
The IEA predicted that heating oil demand in the OECD would average 3.7m b/d in the first quarter of 2010, down 13 per cent on the same period a year ago.
Oil’s contribution to heating and power generation in the western world had been shrinking for a decade as natural gas, renewables and nuclear power have become the fuels of choice for generators.
US natural gas prices fell, with Nymex March Henry Hub down 4.5 cents, or 0.8 per cent, to $5.352 per million British thermal units ahead of the latest inventories report which was expected to show a drop of 180bn cubic feet in gas stocks.
US demand for natural gas should rise 0.4 per cent this year to 62.5bn cubic feet per day, according to the US government, which had previously anticipated a drop in consumption in 2010. Although demand from the power generation sector for natural gas was forecast to fall in 2010, the US government expects this to be offset by consumption growth in the residential, commercial and industrial sectors over the year.
Adam Sieminski, analyst at Deutsche Bank, believes that the US government might be underestimating gas demand.
“Reports this week show a severe and very unusual winter snowstorm across the south from Dallas to Atlanta. This appears to be the same type of weather pattern that caused the unusual rise in electric utility gas use in January,” said Mr Sieminski.
Deutsche said other parts of the US were also getting hit hard with cold, windy weather that would boost gas use for home heating.
“March might also be exceptionally cold across a large section of the central US,” said Mr Sieminski, who noted that Deutsche’s in-house meteorologist was forecasting that next month could be 15 to 20 per cent colder than 10-year average temperatures for the month.
Copper fell 2 per cent to $6,810 a tonne while aluminium lost 1.7 per cent at $2,042 a tonne.
Gold traded at $1,086.30 a troy ounce after ending Thursday’s session in New York at $1,094.95
