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Oil prices edge up after US drilling cut but oversupply still weighs
[SINGAPORE] Oil markets edged up in early Asian trading on Monday, with U.S. crude contracts receiving support from reduced American drilling, although weakening demand weighed on international markets.
US crude futures were trading at US$44.86 per barrel at 0215 GMT, up 23 cents from their last settlement, pushed by a slight fall in drilling activity.
The global crude benchmark Brent was trading at US$48.18 a barrel, up 4 cents from its last close. "Baker Hughes reported US oil rig count fell 10 to 652 last week. The consecutive second decline suggests a low price environment coupled with low oil price hedge is starting to impact US supply," ANZ bank said on Monday.
The International Energy Agency (IEA) said on Friday that a cut in production from non-OPEC suppliers, especially from the United States, would lead to a rebalancing of the market by next year.
The outlook for oil markets outside the United States remained weak, however, as high production clashed with stalling demand, creating a market in which more oil is produced than needed. "Both the supply and demand pictures look less favorable over the coming months... Outside the US, oil fundamentals appear to be slipping seasonally," Morgan Stanley said on Monday in a note to clients, adding that there was potential for some floating storage within the second half of 2015.
ANZ said strong supply from the Middle East remained a concern on the supply side, while Macquarie bank noted that falling auto sales in August were acting as a drag on demand.
"Sales were 1.0 per cent lower YoY (year-on-year), slightly more than the 0.8 per cent fall seen in July 2015," the bank said, although it added that sales could pick up towards the end of the year.
In part due to oversupply and to defend market share, Middle East supplier Kuwait set its October Official Selling Price (OSP) for crude oil to Asia 60 cents lower compared with September at a discount of US$1.95 per barrel versus Oman/Dubai prices.