SINGAPORE: Crude oil prices fell on Tuesday as slow economic growth and high supplies meant that markets remain oversupplied, although U.S. prices received some support from rising demand ahead of the summer driving season.
Brent futures LCOc1 were down 60 cents at $65.67 a barrel by 2.12 a.m. ET, after an almost 1 percent fall on Monday on near-record Saudi exports.
Goldman Sachs said Brent crude prices were due for a downward correction after a recent rally that saw prices of the North Sea benchmark jump 50 percent since its mid-January lows.
“We find that the global market imbalances are in fact not solved and believe that the rally will prove self-defeating as it undermines the nascent rebalancing,” the bank said in an overnight report that reiterated its downward revision of long-term oil prices on Monday.
It said the ongoing oversupply, upside to U.S. production at current prices and excess capital access would be the main drivers pulling down prices.
“Our supply and demand balance points to a still well oversupplied market through 2016 despite the perception of improving fundamentals,” it added.
Cheap oil, which is still down by around 42 percent since its peak in June 2014, has failed to spur growth in Asia, analysts said.
“The trouble is there are no signs that growth is benefiting from lower oil prices. By now, demand should have started to strengthen.
Instead, the first quarter probably represented a new low in the region’s growth since the global financial crisis,” HSBC said, adding that “this hints at broader, structural factors weighing on Asia’s growth”.
China’s new home prices fell for an eighth month in April from a year ago, indicating the property sector remains the biggest risk to the world’s No.2 economy, which looks set for its worst year in 25 years. China is also the world’s top energy consumer.
Further weighing on oil prices were supplies from top exporter Saudi Arabia, which shipped out 7.898 million barrels per day in March, the highest in almost a decade.
U.S. crude prices received a little bit more support by rising demand ahead of the Memorial Day weekend. WTI futures CLc1 were at $58.98 a barrel, down 47 cents.
More U.S. drivers will hit the roads this Memorial Day holiday than in the past decade, fueled by a growing economy and low gasoline prices, the nation’s largest motorists’ advocacy group has said.
AAA expected 37.2 million people would journey 50 miles (80 km) or more from home during the May 21-25 period, a 4.7 percent jump from the 35.5 million who traveled for the holiday weekend last year and the most Memorial Day-related traffic since 2005.