Oil prices flat on oversupply concerns, weak dollar

[NEW YORK] Oil prices ended largely unchanged on Tuesday as a weaker dollar spurred a rebound from an early slide after the International Energy Agency forecast supply could outstrip demand.

The market dipped in post-settlement trading after industry group The American Petroleum Institute said US crude inventories rose by 3.9 million barrels in the week ending Feb 9. Analysts had expected stocks to rise by 2.8 million barrels.

Brent futures hit a two-month low early in the day's session, but the benchmark settled at US$62.72 a barrel, up 13 cents or 0.2 per cent. US West Texas Intermediate crude futures closed 10 cents, or 0.2 per cent, lower at US$59.19 a barrel.

The day's recovery earlier was supported by the dollar, which slid to a one-week low, which made crude cheaper for buyers using other currencies.

But in thin post-close trading, US crude futures were down 34 cents at US$58.95 a barrel.

Petrol futures also turned negative in post-settlement trading. Inventories rose by 4.6 million barrels, compared with expectations for a 1.2 million-barrel gain. Petrol futures fell 0.3 per cent to US$1.6737 a gallon.

The API figures underline wider concerns of oversupply. The Paris-based International Energy Agency said global oil supply would outstrip demand this year, prompting fears that efforts to reduce inventories would fall short of expectations.

"We've been under pressure ... it's all been a function of the IEA report," said Bob Yawger, director of energy futures at Mizuho.

The IEA revised its global demand forecast upward by 7.7 per cent. Still, rising production, particularly from the United States may outweigh demand gains.

The United States overtook Saudi Arabia last week to become the second-largest global producer.

Production is increasing against a backdrop of broader market uncertainty. Since the stock market began falling early this month, oil prices have wiped away the year's gains.

"There are a lot of people who are praying that last week's collapse in crude ... was some anomaly, and that as soon as the stock market recovered, the crude market would recover with it,"said Walter Zimmerman, chief technical analyst at United-ICAP.

"So far it's looking a little ominous but WTI has not broken down," Mr Zimmerman said, adding the contract would have to decline more to enter a bear market.

Seasonality may also be affecting prices, analysts said.

"A driving force behind the next few weeks of pricing vulnerability stems from the current peak in US refinery maintenance season," Michael Tran, commodity strategist at RBC Capital Markets, wrote in a research note.

The US Energy Information Administration will release weekly inventory data on Wednesday.

REUTERS