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Oil prices down in Asian trade

Oil prices

Singapore: Oil prices fell in Asia today after a rise in US output to more than 30-year highs fanned fears over a global supply glut, ahead of the OPEC cartel’s meeting that is expected to see it maintain generous production levels.

US benchmark West Texas Intermediate (WTI) for July delivery fell nine cents to USD 59.55 while Brent eased seven cents to USD 63.73 in late-morning trade.

Analysts said dealers are concerned that producers are not pulling back on output despite an oversupply that has seen prices slump almost 50 percent over the past year.

The US Department of Energy’s latest petroleum report yesterday showed US output rose 20,000 barrels a day to 9.59 million in the week to May 29 — the second consecutive gain and the highest since January 1983.

Sanjeev Gupta, head of the Asia-Pacific oil and gas\ practice at business consultancy firm EY, said the oil market was “bearish” ahead of the 12-nation Organization of the Petroleum Exporting Countries’ (OPEC) meeting in Vienna on Friday.

Expectations are that “OPEC would maintain its current stance and not reduce their output in order to retain overall market share”, Gupta said.

At its last meeting in November, the cartel, which pumps around 30 percent of the world’s oil, kept its official production target of 30 million barrels per day, in a move seen as trying drive high-cost US shale oil producers out of the market.

That decision initially contributed to prices slumping to six-year lows in January but some analysts say the strategy, backed by OPEC kingpin Saudi Arabia, has paid off as US shale oil producers have been squeezed and crude has recovered in recent months.

“OPEC members seem to view the current policy as a success and thus, we see little reason that they would change their game plan now,” said Daniel Ang, investment analyst at Phillip Futures in Singapore.

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