Oil prices fall as weak China data, oversupply drag on markets

SINGAPORE (Reuters) – Crude oil prices reversed earlier gains on Tuesday, as gloomy Chinese data dragged on sentiment in a market already weighed down by persistently high production levels.

A gas nozzle is used to pump petrol at a station in New York February 22, 2011. REUTERS/Shannon Stapleton

A gas nozzle is used to pump petrol at a station in New York February 22, 2011.
REUTERS/Shannon Stapleton

Oil futures initially rose, tracking Asian stocks, but were later pulled down as data showed China’s national rail freight volumes logging their biggest ever annual decline in 2015, raising questions about how sharply the world’s No.2 economy was slowing and what this meant for oil demand.

By 0832 GMT (3.32 a.m. ET), Brent was at $37.09 a barrel, down 13 cents from its previous close, while U.S. West Texas Intermediate (WTI) crude (CLc1) was down 9 cents at $36.67 per barrel.

The supply side continues to be dominated by producers’ unwillingness to cut output and that has led to a surplus of hundreds of thousands of barrels of crude every day as well as a price drop by two-thirds since mid-2014.

ANZ said the tensions between Saudi Arabia and Iran “will further aggravate the oversupply situation in 2016”.

It will “reduce the likelihood of any collaboration between the two oil majors regarding oil output as Iran re-enters the international market once sanctions are lifted”, the bank said.

According to a Reuters poll, Brent and WTI are likely to average around $50 this year as rising supply meets subdued demand.

Crude inventories are already near record levels in United States, the world’s top oil consumer.

Industry group American Petroleum Institute will release storage data at 4:30 p.m. ET. [EIA/S]

With brimming U.S. inventories and tensions in the Middle East, WTI crude could once again flip to a premium versus Brent <cl-lco1=r>, analysts said.

“As U.S. crude oil is starting to be exported, we would think that the further widening of spreads into positive region (of WTI over Brent) will come in the coming weeks,” brokerage Phillip Futures said.

Congress lifted a four-decade old ban on U.S. crude exports in December and several companies have announced they will soon export cargoes.

Categories: Oil Market

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