Oil prices have seen something of a rebound since BP’s last earnings when a barrel was trading around US$33 with Brent crude now fetching around US$44 a barrel but there is no sign of major producers curtailing output in a bid to support prices further.
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NEW YORK, April 25 (Reuters) – Oil prices fell as much as 2 percent on Monday after an inventory spike at a key storage base for USA crude and leading banks in the commodities trade said a two-month long rebound has defied fundamentals.
The world oil market has been hammered over the past two years by weak demand, overproduction, a slowing global economy – particularly China – and a supply glut.
US West Texas Intermediate (WTI) futures were down around half a dollar, or 1.2 per cent, at US$43.22 a barrel. BP now expects total organic capital expenditure in 2016 to be around $17 billion and, in the event of continued low oil prices, sees flexibility to move to $15-17 billion in 2017. On Friday, it hit a five-month high of $44.49.
Market analysts at Point Carbon said: “The rally of crude benchmarks appears to be running out of steam as market participants may start cashing out fearing that prices advanced too fast in a short period of time”.
“Fundamentals remain bearish and are set to deteriorate further, especially if prices move higher”, Morgan Stanley said on Monday.
This week, the Federal Reserve Bank will hold its policy meeting on Tuesday and Wednesday.
Futures traders said prices had been lifted by a weaker dollar overnight.DXY, which potentially spurs demand from fuel importers using other currencies than the greenback, in which crude is traded. Larger-than-expected draws in domestic inventories combined with a smaller-than-expected growth in crude oil inventories are also believed to be contributing to the bullish sentiment that is beginning to surface in the crude oil market, according to the release.
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The oil market also got support from the Baker Hughes weekly U.S. rig count, which showed oil producers curtailed use of eight drilling rigs in the week ending April 22.
