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Oil prices stable as falling US output countered by ongoing global glut
[SINGAPORE] Oil prices were stable early on Wednesday, supported by falling US production but capped by doubts major exporters can coordinate an output freeze to rein in a global glut, while China's economic slowdown raised concerns over future demand.
US West Texas Intermediate (WTI) crude futures were trading at US$36.51 per barrel at 0122 GMT, up 1 cent from their last settlement and almost 40 per cent above February's 2016 and multi-year low.
International Brent crude futures were at US$39.62 per barrel, down 3 cents from their last close, but over 40 per cent above their January lows for this year. "The recent oil rally is looking overextended ... China's export data was horrendous," Matt Smith of Clipper Data said in a daily report.
China's February trade performance was far worse than economists had expected, with exports tumbling the most in over six years.
Although China imported record crude volumes of 8 million barrels per day in February, traders and analysts expect this figure to fall as the government scales back purchases of strategic reserves, and car sales begin to fall as the sharpest economic slowdown in a generation starts to show results.
Starting in mid-February, crude prices started rallying strongly on hopes that a coordinated freeze in production would stop growth in a global supply glut of at least 1 billion barrels per day above consumption that helped pull prices down as much as 70 per cent since 2014.
But Opec-member Kuwait, which pumps 3 million barrels of crude per day, this week poured cold water on hopes of such freeze by stating that it would only cap output if all major producers participate, including Iran, which has balked at the plan.
One key factor in determining the oil market balance will be US output, which the government on Tuesday said would be 8.19 million barrels a day in 2017, down from over 9 million barrels per day currently.
But with demand growth also slowing, many analysts including influential bank Goldman Sachs, say that it will take time for markets to rebalance to a point that much higher oil prices would be warranted.