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Oil inches above US$48, outlook remains weak
[LONDON] Oil edged above US$48 a barrel on Wednesday, consolidating after a drop in the previous session, although traders and analysts said oversupply and the prospect of inventory rises made further weakness likely.
Prices fell by up to 5 per cent on Tuesday after the International Monetary Fund cut its 2015 global economic forecast and OPEC member Iran hinted at further price weakness, saying its oil industry could withstand US$25 oil.
Brent rose 61 US cents to US$48.60 a barrel at 0959 GMT. It hit US$45.19, its lowest since March 2009, on Jan 13. US crude added 41 US cents to US$46.88. "The market is consolidating between US$45 and US$50 and will at some point break to the downside," said Christopher Bellew, a senior oil broker at Jefferies in London, referring to Brent. "It's not going to be until the second half of the year until we see evidence of production being cut by these low prices." In a strategy shift, the Organization of the Petroleum Exporting Countries decided last year against cutting its supply and is betting the drop in prices will curb the growth of more costly-to-produce competing sources, such as US shale oil.
The price collapse is starting to slow growth in US output, according to OPEC, and prompting investment cuts. The head of France's Total said he had ordered the company to limit US shale spending.
Still, OPEC's own forecasts point to a surplus in 2015, leaving an excess for inventories to absorb. "We see little scope for avoiding a large stock build in the first half of 2015 and therefore anticipate weak prices,"analysts at BNP Paribas said in a report.
The latest weekly snapshot of supplies in the United States, the top oil consumer, is due on Wednesday. Crude stocks are expected to rise by 2.6 million barrels, a Reuters survey of analysts showed.
Industry group the American Petroleum Institute releases its report on Wednesday. A US government update follows on Thursday.
Brent fell almost 50 per cent in 2014 in its biggest annual drop since 2008, pressured by weakening demand and a supply glut prompted by the US shale boom and OPEC's refusal to cut output.
Russia has refused to cut production with OPEC, but Deputy Prime Minister Arkady Dvorkovich said on Wednesday that oil output may see a natural decline of as much as 1 million barrels per day (bpd).