Geopo­lit­i­cal wor­ries lift oil, but glut weighs

Kuwait Times - - BUSINESS -

LON­DON: Oil prices edged up yes­ter­day on geopo­lit­i­cal con­cerns af­ter Fri­day’s deadly at­tacks in Paris claimed by Is­lamic mil­i­tants, but gains were muted due to a global crude glut.

France car­ried out large-scale air strikes against Is­lamic State sites in Syria overnight, giv­ing oil mar­ket in­vestors rea­son to step up buy­ing ac­tiv­ity af­ter a week in which crude bench­mark prices fell as much as 8 per­cent. “Some risk pre­mium is fac­tored into the mar­ket af­ter the terror at­tacks in Paris. We had an over­sold mar­ket, so it is a tech­ni­cal re­cov­ery as well,” said Frank Klumpp, oil an­a­lyst at Stuttgart-based Lan­des­bank Baden-Wuert­tem­berg.

Front-month Brent crude prices were up 34 cents at $44.81 a bar­rel at 0915 GMT. U.S. fu­tures traded 36 cents higher at $41.10 a bar­rel.

An OPEC del­e­gate from a Gulf pro­duc­ing coun­try said he be­lieved that in the mid-term oil prices could get some sup­port due to ris­ing ten­sions es­pe­cially if the in­ter­na­tional com­mu­nity takes more steps to re­duce smug­gling of oil and hits oil fa­cil­i­ties un­der Is­lamic State’s con­trol in Syria and Iraq. But oil and other com­modi­ties could also come un­der re­newed pres­sure on fears the at­tacks will fur­ther slow the global econ­omy. Many an­a­lysts also con­tinue to be­lieve prices will re­main un­der pres­sure due to abun­dant stocks of oil and slow­ing eco­nomic growth.

“Our out­look is skewed neg­a­tive into (the first half of next year). Macro head­winds re­main, crude oil in­ven­to­ries are build­ing,” Mor­gan Stan­ley said.

Oil prices have dropped more than 60 per­cent since June last year as high pro­duc­tion and in­ven­to­ries have co­in­cided with an eco­nomic slow­down in Asia, par­tic­u­larly in China but also Ja­pan, which slipped back into re­ces­sion in the third quar­ter.

“The fact that both crude oil and com­bined crude and prod­uct stocks are near record lev­els is a rea­son for con­cern,” Bar­clays bank said in a re­search note. —Reuters

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