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Oil heads for 7th weekly loss as supply glut drags

Friday, January 9, 2015 - 16:06

[SINGAPORE] Oil prices were heading for a seventh weekly loss on Friday, with key producers showing no signs of cutting output in the face of a global supply glut.

Brent and US crude futures both hit their lowest since 2009 this week and are down more than 50 percent from June, although they inched up on Friday after robust US economic data brightened the outlook for demand.

Brent crude had climbed 9 cents to US$51.05 a barrel by 0717 GMT. US crude for February delivery was up 29 cents at US$49.08. Brent's premium to US crude fell near US$2 a barrel, the narrowest since October.

But supply concerns remained as Saudi Arabia and its Gulf OPEC allies are showing no sign of considering cutting output to boost oil prices even as demand slows globally.

Meanwhile, annual consumer inflation in China remained near the lowest in five years, signalling persistent weakness in the world's largest energy consumer.

"Without any changes to fundamentals, selling appears largely to be jittery investors looking for supply-demand equilibrium," ANZ analysts said in a note.

Traders were wary of calling a floor price at US$50 in the overwhelmingly bearish oil markets.

If recent market history is any guide, Brent prices could mark time around US$50 a barrel for another few days before resuming their decline.

"We've seen oil hovering at around US$60, but it fell way below," an Asian oil trader said.

Supply is piling up with some of the world's largest oil traders hiring supertankers this week to store crude at sea.

BNP Paribas has cut price forecasts for Brent and West Texas Intermediate (WTI) crude by more than US$10 per barrel.

BNP now expects Brent to average at US$60 per barrel this year, down US$17 from a forecast made in November. The 2015 WTI average has been revised down to US$55 from US$70.

"Supply issues will dominate demand in terms of fundamental factors, with the market focusing on how the current supply surplus will ultimately resolve itself," BNP said.

REUTERS