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Oil trades near US$45 as glut overshadows hope for producer action
[LONDON] Oil traded around US$45 a barrel on Tuesday as concern about a supply glut countered forecasts for a drop in US inventories and speculation of producer action to prop up prices.
Total US crude inventories were expected to fall by 1 million barrels in weekly reports, although market intelligence firm Genscape has reported a rise of more than 307,000 barrels at the Cushing, Oklahoma US crude delivery hub, traders said.
Brent crude for October was down 29 cents at US$45.10 a barrel by 1252 GMT, after rising US$1.12 on Monday. The global benchmark fell nearly 15 per cent in July. US crude for September was down 17 cents at $42.85.
"One can only wonder how long this enthusiasm will last considering the oversupplied fundamental backdrop," said Tamas Varga of oil broker PVM. "Current oil price strength does not feel justified."
Opec comments helped fuel the gain on Monday. Its president Qatar, in a rare statement issued by the group's Vienna headquarters, said the market was on the path to rebalancing and the drop in prices would be temporary.
Opec sources have been saying since June that renewed talks about a global output freeze could take place in September, when most members, plus non-members such as Russia, are expected to attend an International Energy Forum meeting in Algeria.
The oil minister for cash-strapped Venezuela sought to keep alive the prospect of producer action to boost prices, saying on Monday a meeting between Opec and non-Opec countries may take place "in the coming weeks".
But Russia said it does not see grounds for new talks with Opec yet. Iran, which refused to join an initiative discussed earlier this year to freeze output levels, has not said whether it would cooperate with any new effort.
Some analysts are sceptical any producer action will result, just as the earlier attempt at an output freeze collapsed in April, scuppered by tension between Saudi Arabia and Iran.
"The discussions are likely to prove to be nothing but empty talk, with Opec sticking with its policy of defending its market share," said Eugen Weinberg, analyst at Commerzbank.
Later on Tuesday, the latest round of US inventory reports will be in focus. Analysts in a Reuters poll forecast that US crude stockpiles fell by 1 million barrels last week.
The American Petroleum Institute, an industry group, is due to release its inventory update at 2030 GMT, ahead of the government's report on Wednesday.