Oil edges lower af­ter Kuwait dents hopes for out­put freeze

The Pak Banker - - MARKETS/SPORTS -

Oil prices edged lower on Tues­day af­ter Kuwait said it would only agree to an out­put freeze if all ma­jor pro­duc­ers take part and Gold­man Sachs an­a­lysts poured cold wa­ter over the prospects for a sus­tained rally. Brent crude fu­tures LOCc1 were down 12 cents at $40.72 a bar­rel at 0922 GMT, hov­er­ing above the $40 mark it last traded at three months ago. On Mon­day the con­tract had climbed by 5.5 per­cent in intra-day trad­ing and it has gained about 50 per­cent since Jan. 20.

U.S. West Texas In­ter­me­di­ate (WTI) fu­tures were down 10 cents at $37.80 a bar­rel. "Prices are lower on the Gold­man Sachs and Kuwaiti com­ments and the oil mar­ket re­mains over­sup­plied," said Ta­mas Varga, oil an­a­lyst at PVM in Lon­don.

Kuwait's oil min­is­ter said on Tues­day that his coun­try's par­tic­i­pa­tion in an out­put freeze would re­quire all ma­jor oil pro­duc- ers, in­clud­ing Iran, to be on board.

"I'll go full power if there's no agree­ment. Ev­ery bar­rel I pro­duce I'll sell," Anas al-Saleh told re­porters in Kuwait City. OPEC mem­ber Kuwait is cur­rently pro­duc­ing 3 mil­lion bar­rels of oil per day, he added. On Mon­day the Ecuadorean govern­ment said that Latin Amer­i­can oil pro­duc­ers would meet on Fri­day to co­or­di­nate a strat­egy to halt the crude price rout.

Tues­day's re­port by Gold­man Sachs said that a re­cent surge in com­mod­ity prices was pre­ma­ture and un­sus­tain­able. "While th­ese dy­nam­ics (ris­ing prices) could run fur­ther, they sim­ply are not sus­tain­able in the cur­rent en­vi­ron­ment," the an­a­lysts wrote. "En­ergy needs lower prices to main­tain fi­nan­cial stress to fin­ish the re­bal­anc­ing process; oth­er­wise, an oil price rally will prove self-de­feat­ing, as it did last spring."

On the de­mand side, China's crude im­ports jumped 19.1 per­cent be­tween Jan­uary and Fe­bru­ary to 31.80 mil­lion tonnes, or about 8 mil­lion bar­rels per day, de­spite over­all weak trad­ing fig­ures re­leased on Tues­day. "Higher 'teapot' (in­de­pen­dent re­fin­ery) de­mand and stronger refining mar­gins ... have con­trib­uted to in­creased im­ports. Fall­ing do­mes­tic crude pro­duc­tion is also sup­port­ive," said Viren­dra Chauhan of En­ergy Aspects.

De­spite strong oil de­mand, ques­tions about the sus­tain­abil­ity of grow­ing con­sump­tion weighed on mar­kets af­ter China's over­all ex­ports tum­bled by a quar­ter in Fe­bru­ary. China's Fe­bru­ary ve­hi­cle sales, a key driver for gaso­line de­mand, were down 3.7 per­cent year on year, data from the coun­try's Pas­sen­ger Car As­so­ci­a­tion showed. "This is re­ally a poor start for trade this year," said Zhang Yongjun, se­nior econ­o­mist at the China Cen­tre for In­ter­na­tional Eco­nomic Ex­changes.

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