US crude stays below $40 in Asia on supply concerns213 views
SINGAPORE: Oil fell during afternoon trade in Asia Wednesday, with US crude hovering near three-month lows as traders awaited data that will give hints of demand in the world’s top consumer.
US crude dropped below the $40 dollar mark for the first time since April on Tuesday, weighed down by oversupply, weak demand and expectations of rising output.
Oil is now in a bear market, with prices down over 20 percent from their June peaks.
Futures gave up earlier gains in Wednesday’s afternoon session as traders waited for official data on US commercial crude inventories from the Department of Energy (DoE).
Industry group the American Petroleum Institute reported Tuesday that US crude inventories and gasoline stockpiles have fallen, signs that the excess stock could be easing.
DoE figures released last week showed that during the summer driving season, when demand tends to peak, US gasoline stockpiles were at their highest seasonal level in at least two decades.
At around 0700 GMT, US benchmark West Texas Intermediate for delivery in September was up two cents to $39.53 and Brent crude for October turned lower, falling three cents to $41.77 a barrel.
Alex Wijaya, CMC Markets senior sales trader, said investors are waiting for further clues from the DoE data before making definitive moves.
“The DoE data will determine if prices will rebound above $40, or move further down,” he told AFP.
Data showing an increase in inventories will heighten worries about oversupply and push prices lower, while a decrease will likely provide support.
He said the psychological floor price is at $39.40, adding: “We might see some tug-of-war for oil prices at this level, but it all depends on the official data later this evening.”
“Don’t forget that after the previous increase in prices, a lot of US refineries have been coming back online and are actively adding to the oversupply,” he added.
A weaker greenback also prompted buying in dollar-priced oil, which becomes cheaper to holders of other currencies when the dollar falls.
It hit a six-week low against a basket of currencies on Tuesday due to expectations the Federal Reserve would delay raising interest rates after recent soft economic data, Singapore’s United Overseas Bank said. –AFP
News Source Times of India