Oil prices extended losses in Asia on Tuesday, with the USA benchmark below $44 a barrel owing to a pick-up in the dollar and as Iran ramps up production, while traders await the release of inventories later in the day.
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A bigger-than-expected build in USA crude inventories to fresh record highs pushed oil markets down after an early rally on Wednesday over concerns about production cuts in Canada’s oil sands region due to a wildfire.
Two years ago, WTI was trading around $100 per barrel.
“The latest rebound in oil prices is set to prolong the supply glut and further delay the market’s rebalancing”, said Norbert Ruecker, head of commodities research at Julius Baer. China is the No. 2 oil consumer after the US, and fears that slowing economic growth in China could reduce oil demand helped push oil prices to 13-year lows earlier this year. Earlier in that session it reached $48.50, a six-month high.
Recent developments in the oil market, including a 20 percent gain in prices in April alone, might resemble a similar pattern seen in March-June 2015, when crude prices rallied from their multi-year lows only to crash dramatically in the second half of the year amid concerns of global oversupply.
A year ago when oil prices jumped about $20 a barrel between January and May, the oil market downturn was just at its beginning. While the lifting of restrictions on USA oil exports has narrowed the gap from as high as $15 a barrel in 2014, the spread between the grades could widen again when oil rises and US shale oil production picks up, Hackett said.
Weak foreign demand and lingering market concerns at home added to an overall sense of caution, analysts said.
A strengthening dollar also weighed on oil prices.
Oil prices fell about 3 percent on Monday as production from the Organization of the Petroleum Exporting Countries neared all-time peaks and record speculative buying in global benchmark Brent sparked profit-taking on last month’s outsized rally. Mounting tensions between the two countries has led to some believing that both countries would ramp up production to safeguard their respective market shares, leading to greater supply in an already oversupplied market.
Petroleum Minister Dharmendra Pradhan told the Lok Sabha in a written reply that India imported 109.09 million tonnes of crude from 10 countries in the Middle East between April 2015 and February 2016, which was 59.22 percent of the total oil imports during the period.
The Energy Information Administration will reveal US petroleum inventories on Wednesday.
“Oil shipments from southern fields of Iraq were at an average of 3.364 million barrels per day in April”.
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Genscape reports near 822,000 barrels Cushing build last week.
