US oil hovers near $40

03 December 2015 – US crude prices were hovering above $40 on Thursday, after falling more than 4% a day earlier on an unexpected rise in stockpiles, while Brent was weighed down by concerns that Opec will keep its output ceiling unchanged.
US crude was trading at $40.23 per barrel early on Thursday, up 29 cents, but down nearly 14% since the start of

November.*Oil rig.

Internationally traded Brent was up 23 cents at $42.72. It ended at $42.49 on Wednesday, the lowest since March 2009.

US crude inventories rose for a tenth straight week, climbing 1.2 million barrels, in contrast to analysts’ expectations of a decrease of 471,000 barrels, data from the US Energy Information Administration showed on Wednesday.

“The market is reacting to the continued build in US inventories, the second thing is the Saudis move to reduce prices for Asian customers,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.

Saudi Aramco said on Wednesday it will cut its Arab Light grade loading in January for Asian customers by 10 cents a barrel from December to a discount of $1.40 a barrel to the average of benchmarks Oman and Dubai.

Saudi Arabia and its Gulf allies will reject fellow Opec members’ calls to cut oil output, Iran said on Wednesday.

Opec made a historic decision last year to maintain high output in an attempt to defend market share from US and other producers.

It is widely expected to re-iterate that strategy at a meeting in Vienna on Friday.

The US inventory build is compounding oversupply concerns as domestic crude production remains strong amid the boom in shale oil output.

Additionally, oil product supplies are also building as warmer-than usual weather in the US north-east, a major market for heating oil, has limited demand. Distillate stockpiles climbed by 3.1 million barrels last week, the EIA said. Expectations were for a 326,000 barrel gain.

Rising US stockpiles will add to a glut that has caused global oil prices to drop 60% since June 2014. Oil production already exceeds demand by 500,000-2 million barrels per day.

Technical analysts said US crude may fall toward its 20 November low of $38.99.

“The bounce from $38.99 has been almost reversed, signalling a continuation of the downtrend from the $50.92, which may extend below $38.99,” said Wang Tao, a Reuters market analyst for commodities and energy technicals.

A strong US dollar, lifted by the prospect of a Federal Reserve rate hike, also weighed on oil prices.

A strong dollar is a negative as it makes greenback-dominated contracts such as crude futures more expensive for those holding other currencies.

Categories: World News

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