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Oil dips on oversupply; calls for producer meeting met with scepticism

by August 10, 2016 General

SINGAPORE Oil prices dipped on Wednesday as a global supply overhang weighed on markets, while talk of a potential producer meeting to discuss propping up prices lent some support but was met with scepticism by analysts.

U.S. West Texas Intermediate (WTI) crude oil futures were trading at $42.69 per barrel at 0207 GMT, down 9 cents from their last settlement.

International Brent crude futures were at $44.93 per barrel, down 5 cents.

Traders said that markets were being weighed down by an ongoing supply overhang in crude and refined fuel products, while a suggested meeting by oil producers was unlikely to result in a significant market tightening.

“Oil eased lower as another round of proposed production freeze talks by OPEC failed to excite investors. An upgrade in U.S. oil production forecasts by EIA also weighed on sentiment. EIA is now expecting U.S. output to reach 8.31 million barrels per day in 2017, up from its forecast of 8.2 million barrels per day in July,” ANZ Bank said on Wednesday.

Venezuela, a member of the Organization of the Petroleum Exporting Countries (OPEC), is trying to drum up support for a producer meeting to decide measures that would buoy oil prices.

“We are actively promoting a meeting of producers, which we estimate could take place in the coming weeks, so that OPEC and non-OPEC countries can sit down to see what the scenario for the winter looks like,” its oil minister Eulogio del Pino said this week.

The last time producers met to discuss measure to tighten oil supplies and prop up prices, in April, OPEC members were not able to agree on any measures.

Analysts said they did not expect more success from a potential future meeting.

“Renewed attempts at verbal intervention by OPEC will help bolster oil market sentiment, although the group will struggle to rebuild its role as a backstop to Brent,” said oil analysts at BMI Research in a note to clients.

(Reporting by Henning Gloystein; Editing by Joseph Radford and Richard Pullin)