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Oil prices dip in Asia as oversupply worries return
[SINGAPORE] Oil prices sank in Asia on Wednesday after data indicated a rise in US stockpiles, reigniting concerns about a supply glut, while profit-takers stepped in after the previous day's rally.
The American Petroleum Institute reported a 2.2 million barrel rise in reserves last week, confounding expectations of a dip at the height of the crucial summer holiday driving season.
The figures rattled traders as the Department of Energy prepares to release later Wednesday official data, which is considered a key gauge of demand in the world's top oil consumer.
At about 0645 GMT, US benchmark West Texas Intermediate fell 51 cents, or 1.09 per cent, to US$46.29 while Brent was 60 cents, or 1.24 per cent, lower at US$47.87.
"It's bearish for oil if stockpiles gain because seasonally speaking, inventories tend to decline at least until mid-August," Hong Sung Ki, a commodities analyst at Samsung Futures Inc., told Bloomberg News.
"But of course, we need to see whether this will be a one-time gain or not." Both contracts surged almost five per cent Tuesday from two-month lows after Opec said it expected the global supply glut to ease this year and next thanks to reductions in output from producers outside the cartel, particularly the United States.
Prices have fluctuated between US$44 and US$52 a barrel over the past month after hitting near 13-year lows below US$30 in February, but a surge in OPEC production in June revived fears about oversupply.
Energy information provider S&P Global Platts said production from the Organisation of the Petroleum Exporting Countries climbed 300,000 barrels per day in June, close to an eight-year high of 32.73 million barrels per day.
This is due to a tentative recovery in production in Nigeria and Libya, and a "steady" rise in output from Saudi Arabia and Iran, it said.
"We had the bulls for a couple of weeks and the bears are starting to step in," David Lennox, an analyst at Fat Prophets in Sydney, said.
"The market has realised that surplus that we had was disrupted, and that it is coming back because those disruptions are going away." Canadian producers are also gradually coming back online, restoring supply for the biggest crude supplier to the US market, after wildfires swept through the Alberta oil sands region from May to July.