Oil prices resume decline on supply glut worries

[SINGAPORE] Oil prices resumed their declines in Asia Wednesday following a US report showing stockpiles surged last week, with analysts warning for further weakness ahead.

Ahead of an official report, the industry-funded American Petroleum Institute (API) said stockpiles had increased by 2.3 million barrels last week.

US benchmark West Texas Intermediate for September delivery fell 70 cents to 50.16 a barrel and Brent crude for September tumbled 53 cents to US$56.51 in late-morning Asian trade.

Both contracts had posted gains Tuesday.

"Crude prices remain under pressure as the supply overhang continues to persist," said Bernard Aw, market strategist at IG Markets Singapore.

Wednesday's official Energy Information Agency data "will be closely monitored, although it is evident that the supply glut problem is expected to stay for a while longer", Aw added.

Oil prices have tumbled from more than US$100 a barrel in June last year as strong production from the United States and the Organization of the Petroleum Exporting Countries led to supplies outpacing demand.

Concerns over the return of Iranian oil to the market following a deal with major powers on its nuclear ambitions have also added to pressure on prices.

The deal - which aims to prevent Iran from building a nuclear weapon - allows for the lifting of crippling economic sanctions on the country, enabling it to ramp up shipments of oil.

A strong greenback, boosted by the prospect of higher US interest rates, has also dented demand for dollar-priced oil, helping push prices downwards.

AFP