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Oil prices dip on rising Middle East supply
[SINGAPORE] Oil prices dipped in early Asian trading on Tuesday on signs that production in the Middle East is continuing to rise, countering falls in US output and threatening to keep a global supply overhang in place for longer.
The international Brent crude benchmark was trading at US$45.68 per barrel at 0100 GMT, down 15 US cents from its last close. US West Texas Intermediate (WTI) crude futures were down 6 cents at US$44.72 a barrel.
The dips came as Iraq, the second biggest exporter within the Organization of the Petroleum Exporting Countries (Opec), was the latest Opec-member to announce its exports were rising, reporting oil shipments from southern fields at an average rate of 3.364 million barrels per day (bpd) in April.
That was higher than the March average of 3.286 million and close to its November record of 3.37 million bpd.
"Energy was weaker. Concerns over rising Opec supply were raised after Iraq announced it had shipped 3.36 million bpd in April," ANZ bank said on Tuesday.
Production in Opec's biggest exporter, Saudi Arabia, was 10.15 million bpd in April, but sources have said it may rise to near-records of 10.5 million bpd in coming weeks.
Adding to surging Middle East output is Iran which, relieved of crippling sanctions in January, has increased its exports to almost 2 million bpd currently from little over 1 million bpd at the start of the year, with sales especially to South Korea soaring.
The surging supplies from the Middle East counter falling US output, where production has declined from a peak of around 9.6 million bpd in June 2015, to below 9 million bpd now, according to US Energy Information Administration (EIA) data.
"It was the falling US production that helped lift prices earlier this year, so if a surge in Middle East output now counters the US decline, then we could well be in for another downward correction in oil markets," one trader said.
Crude futures surged by almost a third in April, and they have recovered over 70 per cent from decade lows reached in early 2016.
"A weaker dollar, falling US oil production, improving economic data from China, combined with large speculative positions fuelled the rally. Analysts, however, have cautioned that inventories remain high and oversupply persists," Singapore Exchange (SGX) said on Tuesday in its monthly report.