Crude rallied early after Saudi Arabia pledged to work towards oil price stability.
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Oil prices have halved over the last 12 months after OPEC chose to maintain its production levels, or even increase them, to retain market share, in part by forcing higher-cost producers elsewhere to cut output. Output from the 12-member OPEC bloc fell in October, led by Saudi Arabia’s drop in demand from its domestic power plants and refineries.
“The market is tired from having looked at the production statistics and the ever increasing supply glut”, said Sucden analyst Kash Kamal. Diesel futures rose 2.1% to $1.4025 a gallon.
Benchmark front-month Brent futures for January lost 80 cents, or 1.79 per cent, to $43.86 a barrel, recovering from a session-low of $43.69.
United States crude stockpiles rose an eighth week, leaving supplies more than 100 million barrels above the five-year average.
With oil prices under pressure since mid-2014 amid concerns about oversupply, the market was focused on recent remarks by Saudi Arabia, the top producer in the OPEC cartel, that it was ready to work with other producers to stabilize oil prices.
But this might not be enough to underpin the broader market, they said.
“Irrespective of [Saudi Arabia’s] statements we still think that the oil price has a challenging time ahead as we move into the first half of 2016’s with rising stocks… and a likely stronger USD”, Mr. Schieldrop said.
“Oil prices and the [U.S. dollar] strength have an inverse relationship and if the [dollar] does strengthen more, oil prices should be taking a hit”, said Daniel Ang, analyst at Phillip Futures.
“We know that Iraq sells for $30, but the Basrah Heavy crude it sells is very heavy and not a competitor to Urals”.
The organization is scheduled to meet on December 4 in Vienna.
Venezuelan oil minister Eulogio del Pino yesterday warned that the Organisation of the Petroleum Exporting Countries (Opec) cannot allow an oil price war, and urged it to take action to stabilise the crude market soon.
Last week, the US energy department reported the country’s crude inventories increased by 0.3 million barrels in the week ended November 13.
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Weaker global growth and inflation as well as the strength of the dollar will remain “huge” headwinds for dollar-based commodity prices, Bank of America said.
