Oil market heads lower

4th February 2016, Comments 0 comments

Oil prices fell Thursday on resurgent supply glut worries, having risen in volatile earlier deals on the back of the weaker dollar and bargain buying.

The market pushed lower as investors switched focus back to Wednesday's news of another increase in American commercial crude inventories.

In late afternoon London deals, Brent North Sea crude for April delivery slid 36 cents from Wednesday's close to stand at $34.68 per barrel.

US benchmark West Texas Intermediate for March dropped 15 cents to $32.13.

"Oil markets were volatile on Thursday as traders pushed the price wildly between gains and losses," said analyst Jasper Lawler at trading firm CMC Markets.

"There is a residual bearishness in oil markets because of the oversupply demonstrated by the weekly US inventories build."

The US Department of Energy said Wednesday that commercial crude stockpiles soared by 7.8 million barrels in the week ending January 29.

That was almost double market expectations and took total crude inventories to 502.7 million, topping 500 million barrels for the first time on record, exacerbating market concerns over the global glut that has depressed prices for nearly two years.

Meanwhile, traders eagerly awaiting critical US non-farm payrolls data that is scheduled for publication on Friday.

The data release is key for the oil market because the United States is the world's top crude consuming nation.

"If Friday's jobs report does disappoint expectations badly then the dollar could extend its decline further, potentially leading to more gains for oil," said City Index analyst Fawad Razaqzada.

"Overall however I feel we will see some side-ways price action going forward, until such a time that either the dollar starts to push higher once again or the fundamentals improve significantly for oil."

Oil is traded in dollars so a softening of the US currency makes crude cheaper for holders of other units, perking up demand and prices.

Crude futures had also rebounded earlier Thursday on fresh speculation of a possible output cut by the OPEC producers' group.

Comments by Ecuador, one of OPEC's poorer members, that there might be a special OPEC meeting later this month have also revived hopes for an output cut, according to other analysts.

Analyst Daniel Ang, at Phillip Futures in Singapore, said that any oil price rise must have a solid foundation, otherwise it would not last.

"The current trend now is that producers which are hurting very badly from the low oil prices would say there might be an output cut. But the countries that really have the influence are not saying anything," he said.

"So I think we should wait for concrete movements not just hearsay."

A price rebound last week driven by talks of possible coordination between Russia and OPEC to slash production fizzled out after traders realised there was no substance to it.

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© 2016 AFP

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