Oil prices edge up but no end to glut in sight

LONDON: Oil prices rose on Wednesday a day after a report showed inventories fell at the Cushing, Oklahoma, delivery hub but gains were capped as investor’s awaited official US inventory data.

Crude oil and oil product data due at 1430 GMT from the Department of Energy’s Energy Information Administration (EIA) is expected to show further stockpiling at a time when the world’s largest oil exporters are pumping at record rates to retain market share.

Brent December crude futures were up 49 cents at $47.30 a barrel at 1118 GMT, having fallen to their lowest since mid-September on Tuesday and unwinding a rally that took the price to a peak of $54 this month.

US crude for December delivery rose 45 cents to $43.65 a barrel, up from Tuesday’s nine-week low of $42.58.

“I’m bearish going into Q1 … and what was quite telling is the last rally did not go further than $54 and it was just sold down,” SEB analyst Bjarne Schieldrop said.

“The whole signal that OPEC members are undercutting each other is not sending a great signal to the market.”

Iraq’s southern oil exports have reached 3.10 million barrels so far this month, indicating continued high output from the larger members of the Organization of the Petroleum Exporting Countries.

The premium for crude for delivery in 12 months’ time over that for December delivery, or contango, rose to its highest in six weeks, often a sign that investors expect supply to be far more plentiful in the near term.

On the physical market, the contango in the North Sea derivatives market, which underpins Brent futures, rose to its highest since early September this week, reflecting how excess barrels are weighing on near-term prices.

“Sweet crudes in Europe are going through a rough patch at the moment, as evidenced by the number of regional and (West African) sweet crude differentials slipping into negative territory against Dated Brent,” energy consultants JBC Energy said in a report.

BP on Tuesday announced further spending cuts and more asset sales over the coming years to tackle an extended period of low oil prices and to help pay for its $54 billion US oil spill settlement

Crude stocks at the Cushing delivery hub fell by 748,000 barrels, data from the American Petroleum Institute showed late on Tuesday.

In addition to the EIA’s official crude oil and oil product data, investors are also awaiting a statement by the US Federal Reserve due at 1800 GMT in which it is expected to leave interest rates unchanged.

The whole signal that OPEC members are undercutting each other is not sending a great signal to the market (Reuters)

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