Oil prices ease off multi-month highs

[LONDON] Oil prices dipped on Thursday, after hitting three-month highs this week, with analysts warning that larger gains would be unwarranted as refineries enter seasonal maintenance and a global glut weighs.

Brent crude futures were at US$40.75 per barrel at 1329 GMT, down 32 cents from their last close, having earlier this week peaked at US$41.48, the highest level since Dec 9.

US crude was down 1 cent at US$38.28 per barrel, having hit US$38.51 on Tuesday, also its highest since Dec 9. "Fundamentally you would expect prices to weaken from here because we're about to head into peak refinery turnaround season," said Virendra Chauhan, an analyst at Energy Aspects.

"We expect weakness in the physical market as demand from refineries comes off."

Global demand for crude oil typically dips when refineries around the world enter seasonal maintenance in spring, ahead of peak summer demand.

Prices rose as much as 5 per cent on Wednesday, after a big gasoline inventory drawdown in the United States overshadowed record-high crude stockpiles.

But analysts warned that a global crude production overhang of more than 1 million barrels per day (bpd) showed few signs of abating.

The focus lies on a potential agreement to rein in output between producers from the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and non-OPEC exporters including Russia.

Yet beyond announced talks about freezing output near record levels - which Latin American producers said on Thursday had been delayed - no deal has been reached.

Barclays said there was no talk of a production cut during a research trip to Saudi Arabia and the country's goal was to keep production at around 10.2 million bpd over the next five years.

Most analysts expect the oil glut to last into 2017 or even 2018, resulting in low prices.

Only by 2020 is there a consensus for prices to rise towards US$70 a barrel, based on low investment in production.

The European Central Bank cut all three of its interest rates and expanded its asset-buying programme on Thursday, delivering a bigger-than-expected cocktail of actions to boost the economy and stop ultra low inflation becoming entrenched.

Surprising markets, it cut its main refinancing rate to zero from 0.05 per cent.

The dollar strengthened against the euro in the wake of the news, potentially hampering dollar-traded oil imports.

REUTERS