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Oil up but capped by oversupply, China economy concerns

Published 14/10/2015, 06:01
© Reuters. An employee holds a gas pump to refill a car at a petrol station in central Seoul
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By Meeyoung Cho

SEOUL (Reuters) - Crude oil futures edged up on Wednesday, paring some losses in the previous session on an International Energy Agency report that said the market would remain oversupplied for at least another year.

Front-month Brent (LCOc1) for November delivery gained 7 cents to $49.31 a barrel as of 0458 GMT after it ended at $49.24 per barrel, down 1.24 percent, or 62 cents on Tuesday.

U.S. crude (CLc1) rose 17 cents, or 0.4 percent, to $46.83 a barrel after settling 0.9 percent, or 44 cents, lower at $46.66 a barrel.

Crude futures rose 15 percent in early October but have since fallen back by almost 10 percent as global production continues to outpace demand and concerns over China's slowing economy prevail.

On Wednesday, data from China which showed consumer inflation had eased more than expected in September while producer prices fell for a 43rd straight month, adding to concerns over growing deflationary pressures in the world's second-largest economy.

"Prices should remain low ... the main reason for that is because global supply and demand for crude did not change much over the past few weeks or even months. We are still in oversupply," Daniel Ang, an investment analyst at Phillip Futures Pte Ltd.

"Considering that you know we are looking for possible worsening oversupply coming from Iran ... this puts the whole situation a lot more bearish."

A global oil supply glut will persist through 2016 as demand growth slows from a five-year high and key OPEC members maintain near-record output, said the International Energy Agency, even as low prices curb supply outside the producer group.

U.S. shale production is expected to fall the most on record in November, extending a nationwide output decline into its seventh consecutive month, according to a forecast from the U.S. Energy Information Administration.

The number of North Dakota oil wells that have been drilled but not fracked rose to an all-time high in August of almost 1,000, as producers delayed bringing them online as long as possible.

Global offshore oil production in ageing fields will also fall by 10 percent next year as producers abandon field upgrades at the fastest rate in 30 years, data shows.

As the oil market remains over supplied, Saudi Arabia failed to attract offers for additional oil cargoes for loading in October, industry sources said.

© Reuters. An employee holds a gas pump to refill a car at a petrol station in central Seoul

Venezuelan Oil Minister Eulogio del Pino said on Tuesday that eight non-OPEC countries have been invited to an Oct. 21 technical meeting of oil experts from the Organization of Petroleum Exporting Countries and non-OPEC countries in Vienna.

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