Oil prices fall on profit-taking, oversupply worries
By Keith Wallis
SINGAPORE (Reuters) – Oil futures fell in early Asian trade on Wednesday as profit-taking and concern over a larger-than-expected build in U.S. crude stocks outweighed a report that Russia and Saudi Arabia had reached consensus on an oil output cap.
Brent crude had dropped 37 cents to $44.32 a barrel as of 0037 GMT, after hitting a four-month high in the previous session, when it settled up $1.86, or 4.3 percent.
U.S. crude dropped 46 cents to $41.71 a barrel after settling up $1.81, or 4.48 percent, the day before.
A firmer U.S. dollar <.DXY> also pressured oil prices. A stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies.
“There are two things. There has been a fantastic rise in prices so I think in the Asian time zone there’s been a little bit of profit-taking,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.
“The second thing is that while we’re waiting for more official inventory data, investors are thinking: ‘Are prices warranted at these levels?’,” he said.
Investors are also concerned oil production could rise as prices move even higher curtailing moves by oil producers, including Russia and Saudi Arabia, for an oil output cap.
That came as Russia and Saudi Arabia were reported to have reached a consensus on Tuesday about an oil output freeze, ahead of an oil producers’ meeting in Doha on April 17.
“There’s no reason for a freeze when oil is at $50 a barrel. If oil prices move back to $35 a barrel there’ll be rhetoric and action for an output cap; at $50 a barrel there’ll just be rhetoric,” Barratt told Reuters on Wednesday.
That came as U.S. crude stocks rose by a larger than expected 6.2 million barrels to 536.3 million last week, according to data from industry group the American Petroleum Institute.
That compared with analyst expectations for a 1.9-million barrel increase.
Official data from the U.S. Energy Information Administration is due later on Wednesday. [EIA/S]
U.S. crude production is forecast to fall by 560,000 barrels per day to 8.04 million barrels in 2017, while U.S. demand would increase by 190,000 bpd, according to the EIA’s short term energy outlook published on Tuesday.
Global oil demand will climb to 1.16 million barrels per day, a 10,000-barrel rise compared with earlier estimates, the EIA said in its monthly forecast on Tuesday.
The agency raised its oil demand growth estimate for 2017 by 120,000 bpd to 1.33 million bpd.
(Reporting by Keith Wallis; Editing by Stephen Coates and Joseph Radford)