Oil prices dip before US inventories report

 23 Mar 2016 - 15:48

Oil prices dip before US inventories report

London: Oil prices slid Wednesday in cautious trade following the Brussels attacks, and as supply glut worries grew before the latest snapshot of US energy stockpiles.

At about 1215 GMT, US benchmark West Texas Intermediate (WTI) for delivery in May dipped 23 cents to $41.22 a barrel. 

Brent North Sea crude for May delivery lost 13 cents to $41.66 a barrel compared with Tuesday's close.

Oil prices were barely changed Tuesday with the market showing little impact from the attacks in Brussels that killed 31 people and wounded 270 more.

"Oil prices are pulling back as the market reaction to the Brussels attacks was not as adverse as expected," said IG analyst Bernard Aw.

"The impact of terror activity on financial markets has lessened substantially in recent years. Economies and markets have a tendency to adjust and desensitise to such events over time."

Oil also fell Wednesday after industry body the American Petroleum Institute said that US crude stocks rebounded by 8.8 million barrels last week, indicating weaker demand and fuelling the supply glut.

The API report was published ahead of Wednesday's key inventories report from the US government's Energy Information Administration.

The EIA is forecast to post a 2.5-million-barrel increase in US commercial crude stockpiles, according to experts polled by Bloomberg News.

"Crude oil prices have fallen... weighed upon as API data (showed) a larger than expected crude oil stockpile build last week," said Dorian Lucas, analyst at energy research group Inenco.

"The API reported a stockpile build of 8.8 million barrels last week, pushing total stockpiles to a record high of 531.8 million barrels.

"Government data from the EIA is expected today, and should a similar stockpile build be reported, crude oil prices could soften further," he warned.

News of rising stockpiles tends to push oil prices lower because it indicates weaker demand in the world's top oil consuming nation.

Key meeting

Traders meanwhile eyed a crucial producers' meeting in Qatar next month.

"We continue to believe that price movements are continually influenced by the current global oversupply," said analyst Daniel Ang at Phillip Futures.

"Fundamentals (of supply and demand) should still be bearish in the immediate term and we continue to believe that cuts to US production would be key further down the road."

He said there may be some price volatility if top OPEC and non-OPEC members agree on a production freeze when they meet in Doha on April 17.

But he added that a mere production freeze at January levels would not be enough to sustain an uptrend in oil prices, which are now more than 60 percent off a mid-2014 peak owing to excess supply and slowing world demand.

"There have to be cuts to production if higher prices were to be favoured," he said.

WTI crude prices last week rose above $40 for the first time since December, boosted by a sharp drop in the dollar which generally makes crude less expensive. Renewed optimism that producers would strike a deal to freeze output also buoyed prices.

OPEC's secretary-general Abdalla el-Badri said in Vienna on Monday that 15 or 16 nations would join the Doha talks.