Brent crude oil claws back tiny premium over U.S. futures, but both fall
Brent crude oil futures regained a slight premium over their U.S. equivalents on Monday but both benchmarks fell as there is no end in sight for oversupply concerns that have brought down prices by two-thirds since the downturn began in mid-2014.
The international crude oil futures benchmark Brent was trading at $37.74 a barrel at 0650 GMT, down 15 cents from its last settlement.
But with U.S. West Texas Intermediate (WTI) futures losing 37 cents to $37.73 per barrel, front-month Brent regained a tiny premium it lost before Christmas.
Yet traders said not too much should be interpreted into these movements as low liquidity meant that prices could move abruptly without changes in price fundamentals.
Trading volumes were down for both contracts in the post-holiday period, with only about 4,500 front-month Brent contracts changing hands by 0648 GMT on Monday versus over 272,000 contracts traded on December 7, the first Monday of the month. There were 8,985 WTI contracts traded by 0648 GMT compared with over 635,000 dealt on December 7.
Singapore-based Phillip Futures said on Monday that it expected “a quiet week ahead” with the biggest expected news for energy markets likely coming from U.S. inventory data to be published on Wednesday and Thursday.
The U.S. market tightened slightly earlier in December, pushing it into a premium over global oil markets, following reduced drilling activity, withdrawals from near record crude stockpiles and the prospect of crude exports following a 40-year export ban.
While the U.S. slightly tightened, international markets remain over supplied as producers like Russia and the Organization of the Petroleum Exporting Countries (OPEC) produce between half a million and 2 million barrels of crude every day in excess of demand.
This is happening while developed and emerging economies especially in Asia are slowing.
Japan’s industrial output fell 1.0 percent in November from the previous month, government data showed on Monday, suggesting that sluggish emerging market demand continues to cloud the outlook for the economy.
In Japan’s refining sector, total oil product sales in November fell to a 46-year low, as a shrinking population and warmer-than-normal weather dented demand for all of the main product grades despite lower crude oil prices, trade ministry data showed on Monday.
Total oil product sales fell 6.9 percent in November from a year earlier to 3.04 million barrels per day (14.49 million kilolitres for the whole month), the lowest for the month since 1969, an official with the Ministry of Economy, Trade and Industry (METI) said.
Source: Reuters
