Oil prices slide further in Asia on global supply glut
Oil prices resumed their decline in Asia Monday as a global glut of crude supplies showed no signs of abating in the face of sluggish demand, analysts said.
U.S. benchmark West Texas Intermediate (WTI) for September delivery fell 51 cents to US$41.99 a barrel in afternoon trade, the lowest since March 2009. Brent crude for October, a new contract, was down 57 cents to US$48.62.
WTI and Brent’s September contract rose in New York on Friday after closing at their lowest level in six and a half years in the prior session.
But oil came under renewed pressure in Asia after the latest data showing the number of rigs drilling for U.S. oil increased last week, the sixth rise in seven weeks, analysts said.
The news added to fears of a prolonged global surplus as output from the Organization of the Petroleum Exporting Countries and the United States remains robust despite the tumbling prices.
“The combination of elevated stockpiles in the U.S. and increasing production from OPEC, sluggish demand growth, and a stronger U.S. (dollar) would continue to pressure oil prices,” said Bernard Aw, mar- ket strategist at IG Markets in Singapore.
As oil is traded in the U.S. currency, a strong dollar makes it more expensive for international investors, dampening demand.
“The devaluation of the yuan by China led to the weakening of other emerging market currencies,” said Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at professional services firm EY (Ernst & Young).
“This spells negative news for crude as a strong U.S. dollar makes crude expensive for importing countries, thereby curtailing demand.”