Oil prices remain weak on supply glut, low Asian and European growth

[SINGAPORE] Oil prices remained near five-and-a-half year lows in early Asian trading on Wednesday after prices saw yet more heavy falls in the previous session, and analysts said a supply glut meant that more falls were likely before a rebound.

Global oil markets on Tuesday slumped for a fourth straight session to five-and-a-half year lows as mounting worries about a supply glut pressured crude prices, which have fallen almost 10 per cent this week to their lowest since spring 2009.

In early trading on Wednesday there were no signs of a turn-around, with Brent crude futures trading at US$50.95 a barrel at 0137 GMT, down 15 cents from their last close, and US futures remained under US$48 at US$47.97 per barrel. "The risks to oil prices remain skewed to the downside in the near term," ANZ bank said in a note on Wednesday morning. "While we expect high cost shale producers to be the first to cut production, this is unlikely to occur until the middle of 2015," it added.

The low prices are a result of high output clashing with sluggish demand, especially in Europe, which is still struggling with its debt crisis, and in Asia, where China's growth is slowing and Japan is battling recession.

On the demand side, output from North American shale producers remains high, although drilling is slowing, and producer club Opec has so far resisted calls to cut production in support of prices.

Instead, it is trying to defend its market share through offering low prices.

Reuters technical analyst Wang Tao said he saw a high chance of Brent falling as low as US$41.99 a barrel and having a current cap at US$58.24 per barrel, while US WTI could fall to US$36.74 before a price recovery.

REUTERS