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Oil prices fall on doubts producers can agree output restraint

by August 17, 2016 General

A worker at an oil field owned by Bashneft, Bashkortostan, Russia. — Reuters picA worker at an oil field owned by Bashneft, Bashkortostan, Russia. — Reuters picSINGAPORE, Aug 17 — Oil prices fell away from five-week highs today as analysts doubted possible producer talks to rein in ballooning oversupply would be successful.

Brent crude futures were trading at US$48.86 (RM195.54) per barrel at 0702 GMT (3.02am ET), down 37 cents from their last settlement. Despite the dip, prices are still up over 17 per cent since early August and remain not far off a five-week high of US$49.36 a barrel reached the previous day.

US West Texas Intermediate (WTI) crude was at US$46.34 per barrel, down 24 cents from its last close, but still up 18 per cent from early August.

Traders said that profit-taking following recent rallies was weighing on prices amid expectations that weekly US EIA oil inventory data due later in the day would show the glut in crude and oilproducts supplies had widened.

“I think the US inventory data will show a greater glut in products which would weigh on sentiment,” a Singapore-based trader said, adding that strong July Opec production figures would weigh on prices.

South Korea’s crude oil imports rose 4.5 per cent to 266.4 million barrels in the second quarter of 2016 from a year ago due to growing shipments from Iran after sanctions were lifted, while localoil consumption also increased on the back of low prices.

In the April-June period, Seoul imported 25.35 million barrels of Iranian crude oil, or 278,615 bpd, 123.3 per cent above the 11.35 million barrels imported a year earlier when sanctions were imposed on Tehran’s disputed nuclear programme.

The fight for market share among some Opec producers has fuelled doubts that talks by producers to rein in oversupply would be successful.

“The rumor mill around producer cooperation has resumed, spurred by recent comments from Saudi Arabia’s oil minister, allowing oil prices to gain,” said French bank BNP Paribas.

Yet like many, BNP said it doubted a successful outcome.

“Given the dismal track record when it comes to recent producer cooperation, we are not holding our breath for an eventual freeze in output and even less so for a much-needed reduction in production to help re-balance the oil market.”

An Opec meeting in June also failed to reach an agreement to limit production, and the group’s output has since reached new records.

On the demand side, BMI Research said that Chinese imports would be relatively weak, compared with previous record years, as “a domestic fuels glut and scheduled maintenance works at several refineries (will) keep a lid on imports over Q3”, although it added that China’s long-term imports would be strong due to falling domestic production. — Reuters