Oil prices bounce, but on track for steep loss

Kuwait Times - - BUSINESS -

LON­DON: Brent crude edged higher af­ter a sharp de­cline yes­ter­day but was on track for the big­gest weekly loss in more than two months as swelling stocks weighed on the mar­ket.

The In­ter­na­tional En­ergy Agency said there was a record 3 bil­lion bar­rels of crude and oil prod­ucts in tanks world­wide. “The un­der­ly­ing sen­ti­ment is bear­ish,” PVM an­a­lyst Tamas Varga said. “I don’t see any­thing that could sup­port prices ris­ing in the long term.”

Brent crude was trad­ing 40 cents higher at $44.46 per bar­rel at 1249 GMT and was on track for a more than 5 per­cent weekly loss. US crude was 5 cents higher at $42.80 a bar­rel. The bench­mark closed al­most 3 per­cent down on Thurs­day on a 4.2 mil­lion bar­rel rise in US crude in­ven­to­ries.

Some of the weak­ness could be down to tech­ni­cal fac­tors, among them the ex­piry of the De­cem­ber Brent fu­tures con­tract to­day, which can re­duce liq­uid­ity and ex­ag­ger­ate price move­ments.

But there was a string of bear­ish in­di­ca­tions on phys­i­cal oil. The IEA, in its Monthly Oil Mar­ket Re­port, said that bal­loon­ing global stock­piles of crude and oil prod­ucts could in­crease the over­hang into next year.

“The cur­rent forecast is for a mild win­ter in Europe and the US. If it turns out to be true, bulging stock lev­els will add fur­ther pres­sure and oil mar­ket bears may choose not to hi­ber­nate,” the IEA said.

Tens of mil­lions of bar­rels of oil are also sit­ting on tankers look­ing for homes, threat­en­ing lo­gis­ti­cal paral­y­sis. Oil was caught in a com­modi­ties mar­ket drop on Thurs­day, with base met­als also hit hard. The Thom­son Reuters/Core Com­mod­ity CRB In­dex, a global bench­mark for com­modi­ties, was near its low­est since 2002.

Crude mar­kets have been dogged by over­sup­ply, es­ti­mated be­tween 0.7 mil­lion bpd and 2.5 mil­lion bpd be­ing pro­duced above de­mand, which has re­sulted in prices fall­ing by al­most two thirds since June 2014.

The glut is a re­sult of high pro­duc­tion by most ma­jor pro­duc­ers, in­clud­ing OPEC, Rus­sia and North Amer­ica. On the de­mand side, an eco­nomic slow­down in Asia, led by the re­gion’s two big­gest economies-China and Ja­pan-has led to con­cerns about slow­ing consumption, though it has held up so far. There were also signs that traders ex­pect more price falls, with a soaring num­ber of op­tions taken to sell crude if prices fall to $40 or even $25 per bar­rel. — Reuters

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