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Oil prices dip in Asia after huge rally

Oil prices

Singapore:  Oil prices fell in Asia today, coming under pressure as dealers took profits from huge gains in the previous session and tried to gauge the outlook for the US economy and its taste for crude.

US benchmark West Texas Intermediate for October delivery eased 79 cents to USD 44.43 while Brent crude for October fell USD 1.00 to USD 49.05 in late-morning trade.

WTI jumped $2.66 (6.3 per cent) on Friday, capping its strongest weekly increase in four and a half years, while Brent surged $2.49 (5.2 per cent) after prices plunged on concerns about China’s faltering economy.

Dealers said the rebound was largely due to news the US economy grew at an annual rate of 3.7 per cent in the second quarter, up from a previous estimate of 2.3 per cent, stoking hopes of a pickup in demand from the world’s top oil consumer.

“Better-than-expected US GDP numbers and the strong rally of global stock market were some of the contributing factors for the recovery in the price of crude,” said Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at consultancy EY.

Oil has been on a roller-coaster ride in recent weeks over fears of a harder-than-expected slowdown in China, the world’s top energy importer, at a time when world markets are awash with supplies.

Signs of rising demand in the US have dragged prices up from six-and-a-half year lows, however, and “key manufacturing and unemployment data from the US and ongoing developments in Yemen will set the tone for prices in the coming weeks,” Gupta said.

Dealers are closely monitoring fresh Saudi-led air raids in Yemen against Shiite Huthi rebels on Sunday, amid fears that the crisis in the country could threaten key crude producers in the Middle East.

Yemen has been gripped by growing turmoil since the Shiite rebels launched a power takeover in Sanaa in February. It borders major oil producer Saudi Arabia.

Daniel Ang, investment analyst at Phillip Futures in Singapore, said investors “remain wary of a volatile week ahead”.

“We believe that bearishness is still in play, and thus, aim a support at USD 44.00 for WTI and USD 48.50 for Brent,” he said.

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