Oil prices dip as crude glut overshadows strong fuel demand

[SINGAPORE] Oil prices dipped on Thursday as a large crude glut and a sliding dollar overshadowed strong global fuel demand.

Front-month Brent futures were down 16 cents at US$63.64 per barrel by 0300 GMT. US crude futures dropped 12 cents to US$59.52.

Crude markets remain oversupplied ahead of Friday's meeting of the Organization of the Petroleum Exporting Countries, which is expected to continue to produce about 2 million barrels per day above demand, adding to a glut that has left millions of barrels stored on tankers without a buyer.

Energy advisory Wood Mackenzie said that it was very unlikely that Opec would agree to cut output at its June 5 meeting and that it expected the group's crude output to remain just above its 30 million bpd production ceiling through 2016.

The company said it forecast Brent to average US$60 a barrel in 2015 and US$70 in 2016.

But strong global fuel demand curbed declines in prices.

Goldman Sachs said that Europe's high diesel consumption was a risk to the bank's bearish Brent outlook of US$58 per barrel for 2015 and US$62 for next year.

European diesel demand grew 7.2 per cent, or 420,000 barrels per day (bpd), in the first quarter of this year compared with the same period of 2014, bolstering Brent prices, according to Goldman. "EU diesel strength is a risk to our bearish Brent view,"the bank said, adding that diesel accounted for 45 per cent of Europe's product output and 43 percent of its demand.

Goldman said that it expected demand to grow by 220,000 bpd, or 3.5 per cent, for the rest of 2015. It sees full-year growth among the strongest in 30 years at 270,000 bpd.

Asian fuel demand is also strong, driven by China where car sales remain strong at around 2 million a month despite slowing economic growth.

In North America, the peak-demand summer driving season is underway and the US Energy Information Administration (EIA) reported a 1.95 million barrel fall in crude inventories for last week.

REUTERS