Oil gives up earlier gains as rising US output, China concerns weigh
[SINGAPORE] Oil prices gave up earlier gains on Tuesday, as concerns over slowing demand and a relentless rise in US crude output undermined the impact of hopes that Opec-led production cuts could be extended.
Brent crude futures, the international benchmark for oil prices, were at US$49.37 per barrel at 0252 GMT on Tuesday, down from a high of US$49.60 earlier in the day and near their last close.
US West Texas Intermediate (WTI) crude oil futures were trading at US$46.46 per barrel, down from an intra-day high of US$46.66 and also little changed from their last settlement.
Traders said that oil markets were under pressure as persistent climbs in US production, especially from shale oil drillers, and concerns over a slowdown in China undermine efforts led by the Organization of the Petroleum Exporting Countries (Opec) to prop up prices.
US crude production has risen by over 10 per cent since mid-2016 to 9.3 million bpd, close to the output of top producers Russia and Saudi Arabia.
"That's making it difficult to drive the stockpiles down to a level Opec thinks will see prices rise sustainably," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
US bank Goldman Sachs said that US shale drillers "fundamentally changed" the oil industry due to their ability to ramp up output much faster than conventional producers.
Bank of America Merrill Lynch said the low oil prices were also due to a slowdown in demand.
"Oil demand growth this year is underwhelming, in part explaining why crude oil prices and refining margins have sold off sharply recently," it said.
AxiTrader's Mr McKenna said that there were concerns about Chinese economic growth as imports and exports slowed.
"The economy could slow more sharply than expected," he said.
Top exporter and de-facto Opec leader Saudi Arabia said on Monday it would "do whatever it takes" to rebalance a market that has been dogged by oversupply for over two years, resulting in crude prices below US$50 per barrel.
A cornerstone of the Saudi promise to rebalance the market would be to extend, potentially into 2018, a pledge led by Opec and other producers including Russia to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year.
REUTERS
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Energy & Commodities
Oil jumps, equities fall as Iran blasts fan Middle East tensions
Gold set for fifth weekly gain as geopolitical risks buoy demand
Oil holds near 3-week low as US sanctions interrupt easing tensions
Seatrium unit ordered to pay US$108 million in arbitration over equipment supply contracts
BP reshapes its leadership team as some executives leave
BHP to decide on future of nickel business by August, trims met coal estimates