Oil prices rebound in Asia but gains limited by glut fears
Singapore : Oil prices rebounded in Asia today but nagging worries about excess supplies kept them below 2016 highs after data showed Iran and Iraq increasing output.
The commodity has rallied for four straight weeks thanks to a weaker dollar and hopes that the world economy is slowly turning positive.
However, it fell yesterday after figures showed Iraqi exports hit a near-record 3.36 million barrels a day in April while Iran’s production during the month reached 3.5 million barrels per day, the most since December 2011.
Adding to demand concerns, data showed factory activity in world number two economy and top energy consumer China slowed in April, leading to worries that a recent spate of upbeat indicators may have been a blip.
At around 0900 IST, US benchmark West Texas Intermediate for delivery in June was up 31 cents, or 0.69 per cent, at USD 45.09 and Brent crude for July rose 37 cents, or 0.81 per cent, to USD 46.20.
“Fundamentally, there are no changes (in the supply and demand balance). In fact the situation seems to be getting worse,” said Bernard Aw, an analyst with IG Markets in Singapore.
He said that while the recent rebound seemed “intact”, it would be a challenge for prices to return to USD 50 a barrel unless the Organisation of the Petroleum Exporting Countries takes concrete action to ease the oversupply during its twice yearly meeting next month.
CMC Markets analyst Margaret Yang said in a note that Iran’s oil production is likely to hit the the 4.0 million barrels a day mark by next month. Iran has been ratcheting up its production since Western sanctions on the country were lifted in January following a deal over its nuclear programme.
“Nonetheless, expectation has been gradually building that an agreement will eventually be reached at June’s OPEC meeting, as low oil prices are hurting all the OPEC members,” she said.
A meeting last month involving OPEC and non-OPEC producers aimed at freezing output collapsed without a deal.
Traders will also have an eye on the release of US stockpiles data tomorrow to gauge demand in the world’s top oil consumer.