Oil prices extend losses on supply glut

SINGAPORE: Oil prices dipped in Asia on Friday, extending the previous day’s sharp losses, while analysts warned the ongoing global supply glut would likely linger.

The commodity has come under pressure in recent weeks following Britain’s shock EU exit vote, while the US heads for the end of the summer holiday driving season with stockpiles still high.

Prices sank two per cent on Thursday as traders were left disappointed by the lack of forward guidance from the European Central Bank on its stimulus, while the Bank of Japan’s governor threw cold water on hopes for robust measures from Tokyo.

Lower expectations for stimulus dented demand hopes, although they did help send the dollar down against the yen and euro, making crude cheaper for anyone holding the other currencies.

At about 0645 GMT, US benchmark West Texas Intermediate slipped 19 cents, or 0.42 per cent, at $44.56, while Brent fell four cents, or 0.09 per cent, to $46.16.

“It’s an inventory story,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, told Bloomberg News.

“The summer drive-time hasn’t been as strong as some had expected. There’s more supply coming on and there are indications that the strength of the global economy is not there.”

Crude had risen from near 13year lows below $30 in February to above $50 in June owing to fires in Canada’s key oilfields, unrest in key producer Nigeria and the start of the US driving season.

However, with those issues now fading and dealers fretting over Brexit, prices have softened again.

“Looking at the monthly chart, oil hasn’t gone above $50 a barrel ever since June 23,” CMC Markets senior trader Alex Wijaya told AFP, referring to the date of Britain’s EU vote. US official data showed that crude stockpiles had fallen for the ninth week in a row, but was hampered by a build in gasoline stockpiles.