Oil Prices Rise Amidst Glut In Global Market | Independent Newspapers Limited
Newsletter subscribe

Business, Slider

Oil Prices Rise Amidst Glut In Global Market

Posted: Jul 24, 2015 at 12:45 am   /   by   /   comments (0)

By Oladunjoye Phillip,  with agency reports


The prices of oil may likely be on its way up after a slight drop recently.

A report by Dow Jones newswires said oil prices rose on Thursday on the weaker dollar but remained under pressure as the global glut of oil shows little sign of abating.

According to the report, US oil futures settled below the key $US50 a barrel mark for the first time since early April on Wednesday after an unexpected increase in US crude inventories. This, it said, adds to the worries of oil market participants triggered by high production from the Organisation of the Petroleum Exporting Countries and only limited growth in global oil demand.

The report said Brent crude, the global oil benchmark, rose 0.3 per cent to $US56.32 a barrel on London’s ICE Futures exchange, adding that on the New York Mercantile Exchange, West Texas Intermediate futures traded up 0.4 per cent at $US49.39 a barrel, while WTI was down about 17 per cent this month.

It said a weaker dollar gave a boost to oil prices on Thursday, noting that the Wall Street Journal Dollar Index, which tracks the dollar against a raft of other currencies, fell 0.3 per cent, explaining that as oil is priced in dollars, it becomes more expensive for holders of other currencies as the greenback appreciates.

The report said that beyond the currency fluctuations, oil prices remained under pressure from the global oversupply of crude, quoting the US Energy Information Administration as saying on Wednesday that weekly oil inventories increased by 2.5 million barrels, while analysts were expecting a fall. The EIA reported a 0.8 million barrel increase at the key WTI delivery point of Cushing, Okla.

According to Thomas Pugh, commodities analyst at Capital Economics, the report puts further downward pressure on oil prices. “We expect the market to remain heavily oversupplied for the next year, keeping prices subdued,” he said.

Meanwhile, global crude production remains robust.

The report also noted that Consultancy Energy Aspects had estimated that global supplies rose by a substantial 0.69 million barrels a day over the month of June, reaching 95.08 million barrels a day, explaining that the biggest share of the uplift came from OPEC producers, with Saudi Arabia pumping around 10.6 million barrels a day, a record high.

“By expanding its production to a three-year high, OPEC is ensuring that the oil market remains amply supplied. No change can be expected here in the near future: OPEC delegates made it clear that they view the weak price as temporary and plan to stick with their strategy of defending market shares,” analysts at Commerzbank said in a report.