Oil prices up in Asia, oversupply hobbles gains

[Singapore] Oil prices rebounded in Asia on Wednesday but buying sentiment remains sluggish owing to supply glut woes and a strong dollar.

Traders are waiting for the release later in the day of a US Department of Energy report on commercial stockpiles in the world's top oil consumer which is expected to show an increase and further confirm the oversupply.

Another key focus is the release later Wednesday of minutes from last month's Federal Reserve policy meeting, with dealers looking for hints on whether it will raise interest rates at its gathering next month.

Speculation has mounted in recent weeks that the central bank will pull the trigger following a string of positive US economic figures.

A hike would likely boost the dollar and make dollar-priced oil more expensive for those holding weaker units, depressing demand.

At around 0250 GMT, US benchmark West Texas Intermediate for delivery in December was up 31 cents at US$40.98, while Brent crude for January was trading 35 cents higher at US$43.92.

"Strong US employment data and statements by (policy board) members crystalised markets' expectations of a December rate hike, causing the trade-weighted dollar to rise by more than 5.0 per cent," Capital Economics said.

"This sharp appreciation has weighed heavily on (dollar-priced commodity) prices over the past month."

Adding to the supply glut woes was a statement Tuesday by Iranian Oil Minister Bijan Zanganeh that Tehran will not negotiate with Opec over its planned 500,000 barrels per day (bpd) production hike once western sanctions are lifted.

"We will not negotiate with Opec to increase our production. We will only notify them when we adapt," he told reporters in Tehran, referring to the Organisation of the Petroleum Exporting Countries.

Sanctions on Iran are expected to be lifted in early 2016 following a landmark deal in July with major powers to curb the country's nuclear ambitions.

Iran will follow its output rise with an extra one million bpd a year later, Zanganeh said.

Analysts have said the excess supplies on global markets that have depressed crude prices for more than a year are likely to stretch well into 2016.

AFP