Morgan Stanley on Monday, for example, warned that any coordinated action is “highly unlikely” as the OPEC members continue to battle for market share.
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SINGAPORE-Oil prices fell over 1 percent overseas early on Tuesday, with Goldman Sachs warning that August’s price rally had been overdone and that a proposed oil production freeze at current near-record levels would not help rein in an oversupplied market. WTI capped a 16 per cent advance over seven sessions on Friday.
Brent crude was up 80 cents, or 1.7 percent, at $49.96 a barrel by 1:48 p.m. EDT (1748 GMT).
Though it has not officially announced whether it will join a new effort to curb production at a meeting of OPEC and other producers in September, Tehran appears to be more willing to reach an understanding on the matter, sources in OPEC and the oil industry told Reuters. The U.S. government will issue official inventory data on Wednesday.
Analysts said the falls were a result of an overdone price rally this month which lifted crude by over 20 percent between the beginning of the month and late last week. And until a freeze is agreed and stuck to, expecting crude prices to rise and stabilize at $60 or $70 a barrel is probably wishful thinking.
Since then, prices have fallen back by more than 3.5 percent.
But at Goldman, the oil strategists said a freeze deal is still possible. “A production freeze would also likely prove self-defeating if it succeeded in supporting oil prices further, with the United States oil rig count up 28 per cent since May”.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. “Running on hopes and fumes also can leave a market vulnerable to downturns”. Many analysts remain skeptical of the effort.
“There are still plenty of needles that need to be threaded to first get the OPEC nations to reach an agreement”, said Bob Silvers, managing director of Energy and Life Sciences at management consulting firm SSA & Company.
Without a collective measure to curtail output, market watchers fear the rebalance of oil supply and demand, originally expected for later this year, would be pushed back. Prices subsequently retreated as Iraq sought to increase exports and Nigerian militants called an end to hostilities, potentially boosting supply.
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Adding to the supply worry is the continuing deluge of products from China. In July, China’s exports of gasoline more than doubled from a year ago to 970,000 metric tons, or 230,000 barrels a day while exports of diesel almost tripled to 1.53 million metric tons, or 362,000 barrels a day.
