Oil falls further on rising US stockpiles

14th April 2016, Comments 0 comments

Oil prices extended losses Thursday after a rise in US commercial crude reserves, while traders turned cautious before this weekend's crunch producers' meeting.

A warning by the Organization of the Petroleum Exporting Countries that the world remains oversupplied also dampened sentiment as key producer nations prepared to gather in Doha for Sunday's talks on freezing output.

At about 1030 GMT, US benchmark West Texas Intermediate (WTI) for delivery in May was down nine cents at $41.67 a barrel.

Brent North Sea crude for June delivery dipped 11 cents to $44.07 a barrel compared with Wednesday's close.

Traders will closely watch Sunday's talks after prices slumped by about three quarters to below $30 between mid-2014 and February this year on the back of the global supply glut and overproduction.

While they have edged back up recently, some analysts warn the oil market is likely to remain volatile for some time.

On Thursday, the International Energy Agency (IEA) said the global glut is set to ease by year's end, but warned that any potential production freeze agreed in Doha would only have a "limited" impact on supplies.

Ahead of the highly anticipated Doha talks, the 29-nation IEA said the oil market, which for months has been depressed by a vast oversupply, was expected to practically balance out in the second half of the year.

Prices shot to 2016 highs on Tuesday on the back of news that OPEC kingpin Saudi Arabia and non-OPEC producer Russia had reached a consensus to freeze output, stoking hopes of a wider deal in Doha.

"As a lot of optimism has been priced in ahead of the freeze meeting, traders shall remain cautious to the possible 'sell on news' next week," said Margaret Yang, an analyst with CMC Markets in Singapore.

EY oil and gas analyst Sanjeev Gupta said the "bearish" US inventory data helped push down prices as it signals weaker demand in the world's top oil consumer.

"In the meantime, China's first-quarter economic data due tomorrow (Friday) and results of the Doha meeting will set the tone for near-term price development," Gupta told AFP.

Crude futures fell Wednesday but remained close to 2016 highs as traders weighed a jump in US crude inventories and a fall in US production.

The US Energy Information Administration said crude stockpiles jumped 6.6 million barrels last week -- or more than six times what analysts had expected.

Rising American oil reserves tend to send prices sliding because they indicate weaker demand in the world's top crude consuming nation.

OPEC, in its April report on Wednesday, trimmed its forecast for global oil demand growth this year and warned of possible further downgrades.

While expectations of an output freeze had helped prices, the group cautioned that "hurdles prevail as oversupply persists and inventories remain high".

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© 2016 AFP

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