Oil prices edged up on Wednesday in a further sign of support around current levels, but analysts said the outlook for the next six months remained bleak due to oversupply.
Oil fell as much as 5 percent on Tuesday after the International Monetary Fund cut its 2015 global economic forecast and key producer Iran hinted prices could drop to $25 a barrel without supportive OPEC action.
Prices stabilised on Wednesday, with traders pointing to buying this week whenever benchmark Brent crude LCOc1 dropped towards $48 a barrel.
Brent spent most of Asia’s trading hours below $48.50 but rose to $48.54 by 0810 GMT, up more than half a dollar, while U.S. crude CLc1 was up 53 cents at $47 a barrel.
But analysts said they expected prices to remain low for the next half-year.
“We see little scope for avoiding a large stock build in 1H15 and therefore anticipate weak prices … Commodity price strength is inversely related to the dollar. With the U.S. in monetary tightening mode and Europe and Japan in an expansive phase, an expected stronger dollar will create headwinds for any upward oil price improvement,” BNP Paribas said in a note.
Morgan Stanley said in a note on Wednesday: “A large inventory buildup would be problematic, even when fundamentals turn, inventory overhangs typically need to be worked off before prices rally sustainably.”
Lower oil prices are bringing down inflation in many countries, especially Asian and European economies that have to import to meet a lot of their demand.
“Headline inflation rates have come down sharply in developed economies because of low oil prices … The global low-inflation environment has created room for policy easing in key economies, most notably in the euro area,” U.S.-based Pira Energy Group said in an overnight note.
Source : Reuters