Oil up after US storage slips, global glut concerns remain
LONDON: Oil edged up on Thursday, supported by a fall in US crude inventories after a run of 10 weekly rises, but global oversupply concerns persisted as investors look to the year-end.
Brent futures are down more than 5.5 percent this week and having dipped below $40 per barrel there are renewed concerns about a test of 2008’s low around $36. Brent futures were up 43 cents $40.54 per barrel at 0857 GMT (0357 ET).
US WTI crude futures were at $37.47 per barrel up 31 cents from their last settlement. They are down more than 11 percent this month. Crude inventories fell 3.6 million barrels in the week to Dec. 4, compared with analysts’ expectations for an increase of 252,000 barrels, US Energy Information Administration (EIA) data showed.
“It’s a glimmer, and for now we’re consolidating above $40 per barrel. But OPEC showed last week it’s a paper tiger in that it won’t do anything to prevent supply growth,” said Michael Hewson, chief market strategist at CMC Markets.
The Organization of the Petroleum Exporting Countries last week failed to reach an agreement on production quotas, leading to fears that increased production from Iran and elsewhere would deepen the glut further. Hewson said that in thin liquidity up to year-end there is a good chance that Brent will fall below its low since 2008 at around $38 per barrel.
Still, there were signs of more demand from China, the world’s second-biggest oil user. Vehicle sales were up 20 percent in November from a year earlier to 2.5 million vehicles, the China Association of Automobile Manufacturers said.
However there was also fresh evidence of market oversupply. The EIA data showed that US distillate stockpiles rose by 5 million barrels, twice the expected increase and the sharpest increase since January.
Between 500,000 and 2 million barrels of crude oil are being produced in excess of demand every day, creating a glut that has pulled down prices by almost two-thirds since 2014.
The excess supply is being pushed into storage and threatens to fill existing facilities.