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Brent oil holds above US$48 after US stocks hit record high
[LONDON] Brent oil futures held above US$48 a barrel on Thursday as speculator buying on hopes for a price rebound offset data showing record-high US crude stocks.
US crude was trading at US$44.26 a barrel by 1141 GMT, down 19 cents but off a six-year low hit on Wednesday. Brent was up 20 cents at US$48.67.
The US Energy Information Administration (EIA) said domestic crude stocks had risen by almost 9 million barrels week-on-week to nearly 407 million, the highest level since the government began keeping such records in 1982.
That pushed US crude to an intraday low of US$44.08, the weakest since April 2009, but Brent held up relatively well.
"It's a tug of war between the non-supportive fundamentals and investor flows - investors are more concerned about missing a potential bounce," said Ole Hansen, senior commodity strategist at Saxo Bank. "But there is nothing bullish to be found in those numbers."
Analysts expect stockpiles to keep building as US production has shown no sign of slowing, and when refiners enter seasonal turnarounds, utilisation rates will fall.
In addition, the market structure gives traders an incentive to buy cheap crude for storage, with the aim of selling it at a higher price for future delivery.
Some traders believe such buying to store has provided a "false bottom" in the market, and that when land storage becomes filled, or floating-storage economics no longer work, there will be another selloff in futures.
"Traders buying and putting oil into storage may be holding the price for now," said Christopher Bellew, a broker at Jefferies Bache in London. "I see the market as being in a consolidating phase ... (but) at some point I expect a move to the downside."
He suggested Brent could test US$40 or lower.
"My principal reason for being so bearish is the production war within Opec as Saudi and Iraq both seek to maximise sales and US production has not yet started to slow."
In an earnings call, Shell's Chief Executive Ben van Beurden said he saw oil prices stabilising at US$90 per barrel in the long run but that it was difficult to predict when this could happen.
He added that oil markets would remain volatile in the medium term given that the fall in prices of over 50 per cent in the last six months was caused by a relatively small oversupply, amounting to only 2 per cent of global demand.