Oil prices ease as gloom over glut over­comes bud­ding bulls

The Pak Banker - - MAR­KETS/SPORTS -

Oil prices eased on Thurs­day af­ter bal­loon­ing US crude in­ven­to­ries and a lack of any fresh ac­tion from the world's largest pro­ducer to tem­per sup­ply snuffed out some of the bullish sen­ti­ment that has built this week.

Brent fu­tures fell 27 cents to $36.66 a bar­rel at 0948 GMT, while U.S. crude fu­tures eased 2 cents to $34.64. "Prices must fall once again to reach bot­tom in a way that re­ally shuts down pro­duc­tion. I don't think a freeze is the so­lu­tion," Natixis com­modi­ties strate­gist Ab­hishek Desh­pande said."That is the only true way of re­ally turn­ing around prices sus­tain­ably and for good...once that hap­pens, there will be a true turn­ing point and, for me, that kind of bot­tom is still be­low $25."

US crude in­ven­to­ries rose 10.4 mil­lion bar­rels to a fresh record of 517.98 mil­lion bar­rels last week. Around 1 mil­lion to 2 mil­lion bar­rels of crude is be­ing pro­duced glob­ally ev­ery day in ex­cess of de­mand, con­tribut­ing to a 70 per­cent fall in oil prices since mid-2014. An agree­ment struck in Fe­bru­ary by some big pro­duc­ers, led by Rus­sia and Saudi Ara­bia, to freeze out­put at Jan­uary lev­els is ex­pected to do lit­tle to re­duce the over­sup­ply, not least be­cause out­put in the first month of the year was at, or near, record highs.

"We con­tinue to re­main wary of pos­si­ble ral­lies," said Daniel Ang of bro­ker­age Phillip Fu­tures.

Prices have risen since Fe­bru­ary thanks to slow­ing US out­put and signs of fi­nan­cial dis­tress among the higher-cost pro­duc­ers that might sig­nal fur­ther sup­ply cuts. U.S. crude out­put fell for a third month in De­cem­ber, as strug­gling oil com­pa­nies suc­cumb to the price rout. Sea­son­ally, the sec­ond quar­ter of the year tends to be one of the weak­est, as spring re­fin­ery main­te­nance cuts crude de­mand.

Reuters data shows on av­er­age over the last 15 years, Brent has gained 4.9 per­cent in the sec­ond quar­ter, com­pared with an av­er­age gain of nearly 7.5 per­cent in the third quar­ter, usu­ally the strong­est in terms of price per­for­mance.

Mar­ket watch­ers have said there has been more bullish­ness spread­ing through the mar­ket. "The mar­ket has sud­denly started to fo­cus on bullish head­lines. This has cre­ated huge in­flows, buy­ing from hedge funds," said Oys­tein Ber­entsen, man­ag­ing di­rec­tor of crude at Strong Petroleum in Sin­ga­pore.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.