Oil prices steady, but over­sup­ply a con­cern


Oil prices stead­ied on Wed­nes­day, con­sol­i­dat­ing af­ter a six-week rout driven by global over­sup­ply and con­cerns about fall­ing de­mand in Asian economies and the United States.

U.S. crude oil fu­tures CLc1, also known as West Texas In­ter­me­di­ate (WTI), were down 20 cents at $42.42 a bar­rel by 1020 GMT. The front-month, Septem­ber, U.S. con­tract ex­pires on Thurs­day. North Sea Brent crude LCOc1 held steady at $48.81 a bar­rel.

"I think the mar­ket has pushed too low and too fast," ABN Amro energy economist Hans van Cleef said. He added that, although he could see oil prices re­bound­ing in the com­ing weeks, he thought they would re­main low into next year.

Oil has lost about a third of its value since June and prices have been hov­er­ing just above six-year lows for the past week. The down­ward trend has been driven by global over­sup­ply and record stock­pile lev­els, an­a­lysts say.

Many an­a­lysts said they ex­pect some tem­po­rary price sta­bi­liza­tion as peo­ple take prof­its from short po­si­tions. But they said the down­ward price trend was likely to con­tinue un­less there was a sig­nif­i­cant re­duc­tion in global sup­ply.

"Any re­cov­ery in WTI prices from a six-year low may be short-lived with the U.S. en­ter­ing the slow de­mand pe­riod in Septem­ber," ANZ bank said.

The Amer­i­can Petroleum In­sti­tute re­ported on Tues­day that U.S. crude stocks had fallen by 2.3 mil­lion bar­rels in the week ended Aug. 14. U.S. gov­ern­ment data on crude stock­piles is due at 10:30 a.m. EST (1430 GMT) on Wed­nes­day.

How­ever, U.S. oil pro­duc­tion is at record lev­els and pro­ducer costs ap­pear to be de­clin­ing, with no out­put scale-back an­tic­i­pated.

"The re­cent drop in the price of oil con­firms ... the global com­mit­ment pro­duc­ers have to their cur­rent lev­els of (high) out­put," said Scott Cockerham, man­ag­ing di­rec­tor Hous­ton-based Con­way MacKen­zie's Energy Ad­vi­sory Ser­vices.

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