Oil trades close to multi-month lows, Brent be­low $50


Oil traded near multi-month lows on Thurs­day with Brent un­der $50 a bar­rel as a sup­ply glut per­sisted de­spite record U.S. re­fin­ery runs, and lit­tle sign of any re­duc­tion in pro­duc­tion.

Brent crude fu­tures were down 30 cents at $49.29 a bar­rel af­ter dip­ping to $49.02 on Wed­nes­day, the low­est since Jan. 30. U.S. crude was down 46 cents at $44.69 a bar­rel at 1052 GMT, just off an in­tra­day low of $44.55.

"Prices are likely to con­sol­i­date or weaken fur­ther," Carsten Fritsch, an oil an­a­lyst at Com­merzbank, said. "The per­cep­tion is that over-sup­ply will be there for much longer." An­a­lysts at Gold­man Sachs said in a note that be­cause U.S. shale oil had dra­mat­i­cally re­duced the time be­tween when cap­i­tal is com­mit­ted and when oil is pro­duced, prices needed to re­main lower for longer to "keep cap­i­tal side­lined and al­low the re­bal­anc­ing process to oc­cur un­in­ter­rupted".

Although U.S. crude oil in­ven­to­ries fell by more than ex­pected last week, ga­so­line stocks un­ex­pect­edly rose.

Ole Hansen, se­nior com­mod­ity strate­gist at Saxo Bank, said this was an early in­di­ca­tion that the U.S. sum­mer driv­ing sea­son was com­ing to a close.

This raises the ques­tion as to what will hap­pen when the peak ga­so­line de­mand sea­son is over. Some U.S. re­fin­ers are run­ning at record high rates to take ad­van­tage of strong re­fin­ing mar­gins. But U.S. crude stocks re­main at much higher lev­els than the long-term sea­sonal av­er­age, Fritsch said.

"If they con­tinue to run at these lev­els then we will see mas­sive builds in dis­til­lates and ga­so­line stocks when the peak de­mand sea­son is over for ga­so­line," he said. It is there­fore more likely that re­fin­ers will cut runs in re­sponse to fall­ing mar­gins or head into sea­sonal main­te­nance, lead­ing to fresh builds in U.S. crude stocks. Septem­ber pro­duc­tion from the North Sea's Brent, For­ties, Ose­berg and Ekofisk crudes, which un­der­pin the Brent bench­mark, is ex­pected to be the high­est so far this year, at 1 mil­lion bar­rels per day (bpd). Mean­while, OPEC oil out­put reached its high­est monthly level in re­cent history in July and Iran is poised to re­turn to the mar­ket. "Un­der the cur­rent Saudi oil pol­icy, it is still more likely ... that any sus­tained price re­cov­ery will come through another OPEC coun­try break­ing down than from North Amer­i­can crude oil pro­duc­tion col­laps­ing," Olivier Jakob, an oil an­a­lyst at Petro­ma­trix, said in a note.

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