Crude oil futures fell around 1 percent in Asian trading on Thursday, eroding gains of nearly 3 percent made in the previous session after Russia held out the possibility of cooperating with OPEC to control global oversupply.
Falls were curbed by a weaker dollar following the Federal Reserve’s decision to keep its overnight interest rate unchanged and the release of a statement suggesting concern about global events had diminished, but not squashed chances of a rate hike in March.
Saudi Arabia’s deputy minister for company affairs at the Ministry of Petroleum and Mineral Resources said on Thursday in Tokyo that OPEC estimates global oversupply to be around 2 million barrels per day (bpd).
“So it will take some time for the market to rebalance,” said Aabed A. Al-Saadoun. But he added that “we feel that the market will begin to come into balance in 2016 and that demand for energy in all forms will continue to increase”.
Brent crude had eased 24 cents to $32.86 a barrel by 0736 GMT, after ending up 4.1 percent at $33.10 in the previous session.
U.S. crude declined 31 cents to $31.99 a barrel. It settled the previous session up 85 cents at $32.30, a 2.7 percent gain.
Russian officials have decided they should talk to Saudi Arabia and other OPEC countries about output cuts to bolster oil prices, the head of Russia’s pipeline monopoly said on Wednesday.
The Energy Information Administration said on Wednesday that U.S. crude inventories climbed by 8.4 million barrels last week, higher than analyst expectations for a rise of 3.3 million barrels. That brought crude inventories to the highest level since the EIA began tracking the data.
But crude stocks at the Cushing, Oklahoma, delivery hub fell by 771,000 barrels, which supported oil prices. [EIA/S]
“Overall inventories rose by 8.38 million barrels. This helped to narrow the spread between Brent and WTI overnight,” ANZ said in a note on Thursday.
Daniel Ang at Phillip Futures said: “We remain slightly sceptical of further increases with the current weak fundamentals. We believe that the slight weakening of the U.S. dollar could be giving the extra push to break the current resistance for WTI and Brent, however, that should not last for long.”
On the outlook for the global upstream sector this year, Wood Mackenzie said in a report: “As companies re-shape their portfolios for the lower oil price environment, exploration spend will be hit hard, to less than half of the 2014 peak.”
Wall Street stocks and the dollar fell on Wednesday after the Fed left rates unchanged. Asian shares rose slightly in choppy trade on Thursday.