Crude futures were mixed in Asian trading on Friday as fresh signs of inventory building and the Fed’s rate hike this week kept prices under pressure amid a global glut of oil that shows no sign of abating, prompting traders to buy more put options.
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By allowing American oil to compete globally, the price for US benchmark West Texas Intermediate crude is inching closer to the global marker Brent, which has traded at a premium for most of the past five years.
Brent crude for February delivery, the front-month contract from Thursday, fell 20 cents to $37.19 a barrel by 1016 GMT. While market analysts had predicted a drawdown, oil storage jumped by 4.8 million barrels, putting total inventories at 490.7 million barrels, less than 300,000 barrels shy of the 80-year record set in April of this year.
The US Federal Reserve raised interest rates, helping to strengthen the dollar on impact and adding temporarily to the woes of the oil price for non-dollar currency countries. There was too much oil in the market and demand was weak.
Oil prices have plunged by nearly 70 per cent in the last 18 months, mainly due to oversupply and less demand from China.
Earlier in the week the U. S. Energy Information Administration said U. Capital markets have shunned some of the most indebted drillers, but access to finance remains open for investment-grade oil drillers.
“This justified fear of an oil glut is continually causing new lows”, said analyst Connor Campbell at trading firm Spreadex.
This fall in prices continued in 2015, as both the crude variants lost its value by around 30 per cent and 33 per cent, respectively.
The forecast comes as the oil cartel’s members-many of which need a price of over $100 a barrel to balance their budgets-have been grappling with free-falling oil prices.
The Organization of Petroleum Exporting Countries abandoned output limits at a December 4 meeting while the White House announced its support Wednesday for a deal reached by congressional leaders that would end the nation’s 40-year restrictions on crude exports.
Goldman Sachs Group Inc. analysts made similar comments on Thursday, saying there was a high risk of OPEC exceeding that 32-million-barrel mark. If oil prices fall below that level, companies will have to make output cuts in order to avert losses.
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“A lifting of the export ban could narrow the spread between WTI and Brent by providing the worldwide market with a substitute for oil from current main supplying regions”, said Sanjeev Gupta, head of the Asia-Pacific Oil and Gas practice at professional services organisation EY.
