Oil prices edge up on short covering, but oversupply still bites
Crude oil prices edged up on Thursday but still struggled to break away from the $40-per-barrel mark as oversupply and high inventories ensured an ongoing glut.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at $40.95 per barrel at 0630 GMT, up 20 cents from their last settlement.
The contract fell below $40 for the first time since August on Wednesday, and traders said the slight gains were more a result of short covering than any bullish sentiment.
Internationally traded Brent crude futures LCOc1 were at $44.52 a barrel, up 38 cents.
Overall, oil markets remain oversupplied, with rising U.S. stockpiles the most visible evidence.
Goldman Sachs said on Thursday there was still a downside risk to oil prices “as storage utilization continues to climb.” The bank added that “we don’t believe that current prices present an appealing entry point” despite low spot prices.
U.S. crude inventories grew by 252,000 barrels last week to 487.3 million barrels, close to record highs, according to data from the Energy Information Administration (EIA), highlighting that more oil is being produced than is needed.
As a result, U.S. crude futures have been struggling to break higher this week, although ANZ bank said rising crude demand from U.S. refineries was also preventing prices from falling much further.
In Asia, Japan said on Thursday it would uphold its monetary stimulus even as the country has slid back into recession and added to concerns that demand in one of the world’s biggest oil consuming countries could stall.
“We think oil prices will average lower next year than this year and only recover very gradually,” said John Davies, head of commodities at BMI Research, a subsidiary of Fitch Rating.
BMI expected an average Brent price of $54 per barrel in 2016 and $53 a barrel in 2017 before prices likely recovered to around $60 a barrel by 2018, he said.
Brent has averaged $55.26 a barrel this year, Reuters data shows.
Source: Reuters
