Oil falls on China eco­nomic woes, ris­ing OPEC sup­ply

The Pak Banker - - MARKETS/SPORTS -

Oil prices fell for a se­cond ses­sion in Asian trade on Tues­day as wor­ries about top en­ergy con­sumer China and ris­ing oil sup­ply weighed on mar­kets, al­though pos­si­ble talks be­tween OPEC and Rus­sia on pro­duc­tion cuts of­fered some sup­port.

Brent for April de­liv­ery LCOc1 dropped 46 cents to $33.78 a bar­rel as of 0146 GMT (8.46 p.m. ET) af­ter set­tling down $1.75, or 4.9 per­cent, in the pre­vi­ous ses­sion.

The front month con­tract for West Texas In­ter­me­di­ate (WTI) CLc1 was down 49 cents at $31.13 as af­ter fall­ing $2.00, or 5.9 per­cent, in the pre­vi­ous ses­sion. De­spite the de­clines, U.S. crude is still nearly 19 per­cent above the more than 12-year low of $26.19 hit in mid-Jan­uary. "(Prices) have just come back to re­al­ity a bit, al­though they are hold­ing wa­ter above $30 a bar­rel," said Ben Le Brun, mar­ket an­a­lyst at Syd­ney's Op­tion­sX­press, point­ing to con­cern over ris­ing oil sup­plies and weaker eco­nomic data.

Oil prices could nudge below $30 a bar­rel again if in­vestors saw hopes fad­ing of a deal be­tween mem­bers of oil pro­duc­ers car­tel OPEC and Rus­sia on pro­duc­tion cuts, he said.

Rus­sian En­ergy Min­is­ter Alexan­der No­vak and Venezue­lan Oil Min­is­ter Eu­lo­gio Del Pino dis­cussed the pos­si­bil­ity of hold­ing joint con­sul­ta­tions be­tween OPEC and non-OPEC coun­tries in the near fu­ture, the Rus­sian En­ergy Min­istry said. But Gold­man Sachs said it was "highly un­likely" OPEC pro­duc­ers would co-op­er­ate with Rus­sia to cut oil out­put, while also be­ing self-de­feat­ing as stronger prices would bring pre­vi­ously shelved pro­duc­tion back onto the mar­ket.

Crude prices fell af­ter China's pur­chas­ing man­agers in­dex dropped to a three-year low in Jan­uary, cou­pled with ris­ing oil sup­plies, ANZ said in a note on Tues­day. "Ris­ing sup­ply also sug­gests fur­ther down­side risk to short-term prices. Out­put from OPEC rose to 33.1 mil­lion bar­rels per day last month as In­done­sia's mem­ber­ship to the group was re­ac­ti­vated," the note added.

In­vestors are wait­ing on a slew of eco­nomic data, in­clud­ing U.S. non-farm pay­roll and un­em­ploy­ment fig­ures and pro­ducer prices from the Eu­ro­zone, to give oil mar­kets fur­ther di­rec­tion, Le Brun added.

That came as U.S. com­mer­cial crude oil in­ven­to­ries likely rose by 4.7 mil­lion bar­rels last week to a new record high of 499.6 mil­lion bar­rels, a pre­lim­i­nary Reuters sur­vey taken ahead of in­dus­try and lat­est of­fi­cial data showed. Gaso­line stocks likely rose 1.3 mil­lion bar­rels last week, while dis­til­late in­ven­to­ries, which in­clude heat­ing oil and diesel fuel, were seen fall­ing 1.7 mil­lion bar­rels.

The Reuters poll was taken ahead of weekly in­ven­tory re­ports from in­dus­try group the Amer­i­can Pe­tro­leum In­sti­tute (API), due out later on Tues­day, and the U.S. Depart­ment of En­ergy's En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA), due for re­lease on Wed­nes­day. Else­where, pro­duc­tion from Iraq's south­ern oil fields dropped to an av­er­age of 3.9 mil­lion bar­rels per day (bpd) in Jan­uary from a record 4.13 mil­lion bpd the pre­vi­ous month, the oil min­istry said.

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