Oil prices fell on Monday as the chances of Middle East producers agreeing to curb overproduction appeared to fade, while stubbornly high US output and worries about Asia’s economic outlook also dragged on prices.
While some analysts expect a recent weakening of the US dollar to spur demand for oil from importers holding other currencies, Morgan Stanley said “negative oil headlines, producer hedging at higher prices and bloated inventories” indicate any upside in prices will be limited.
Front month US crude futures were at $36.36 per barrel at 0520 GMT, down 1.17 per cent or 43 cents from their last settlement. Brent crude was down 1 per cent or 40 cents at $38.27 a barrel.
The benchmarks shed 2-4 per cent on Friday when Saudi Arabia said it would only participate in a global freeze of its output if its rival Iran also took part, something Tehran has so far dismissed.
Adding to concerns of a global glut, which has pulled down oil prices by as much as 70 per cent since 2014, US production has remained high despite steep cuts in drilling for new reserves as well as a jump in bankruptcies.
“The US oil rig count dropped further this week, with a total 10 rigs idled,” Goldman Sachs said. “The current rig count implies US production … would decrease by 705,000 barrels per day yoy (year-on-year) on average in 2016, and by 375,000 barrels per day yoy in 2017,” it added.
So far, US production remains stubbornly high, at over 9 million barrels per day, as operators keep their oil wells gushing in a struggle to service debt and stay alive.
Given a growing belief that prices might not recover by much any time soon, hedge funds have cut their net long positions in US crude for the first time in six weeks.
Despite a pick-up in recent economic data, including from India and China, analysts also poured cold water on hopes that Asia’s economic prospects were improving.
While some data has started to perk up, and there are expectations that Asian exports, production as well as consumer spending should show a bit more swing in the coming months, there had been no fundamental improvement in the region, said HSBC’s Frederic Neumann.
“Asia continues to face a structural growth problem – one that will not be cured in the space of a few, short months.”
The chief executive of the Abu Dhabi National Oil Company said oil markets would only start to rebalance in 2016 and 2017.
(Reuters)
[“source-Businessworld”]
