SINGAPORE – Oil prices wallowed near $40 a barrel as rising crude inventories and poor corporate results suggested the worst U.S. recession in decades could be deepening.
Light, sweet crude for March delivery fell 9 cents to $40.23 a barrel by midday in Singapore in electronic trading on the New York Mercantile Exchange. The contract overnight dropped 46 cents to settle at $40.32.
Fourth quarter U.S. corporate earnings have mostly been dismal, and more companies reported Wednesday that plunging consumer demand is hurting their profits.
Kraft Foods Inc. said fourth-quarter profit dropped 72 percent and Time Warner Inc. reported a loss of $16 billion. Costco Wholesale Corp. said its earnings for the quarter will "substantially" miss Wall Street estimates due to poor sales while Eastman Kodak Co. is bracing for a 12 percent to 18 percent slump in sales this year.
"There are a lot of companies struggling everywhere you look," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. "That follows through to consumer demand for energy products."
U.S. crude inventories have soared over the last month or so, as massive layoffs undermine demand for gasoline.
Oil inventories jumped 7.2 million barrels from the previous week to 346.1 million, according to an Energy Information Administration report on Wednesday. Crude supplies are running at a surplus of 50.3 million barrels from the same period last year.
OPEC output cuts have helped bolster prices, keeping them above a five-year low of $33 a barrel in December. The Organization of Petroleum Exporting Countries has promised to reduce output by 4.2 million barrels since September, and the group's leaders have said the cartel could announce more production cuts at its next meeting in March.
"We're seeing OPEC follow through with their supply cuts and that's having an impact," Kornafel said. "I think the price would be about $10 lower right now without any OPEC cuts."
In other Nymex trading, gasoline futures rose 0.28 cent to $1.22 a gallon. Heating oil was steady at $1.33 a gallon while natural gas for March delivery rose 4.8 cents to $4.65 per 1,000 cubic feet.