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Oil trades close to multi-month lows, Brent below $50

Latest Update: August 6, 2015 | 218 Views
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SINGAPORE: Oil traded near multi-month lows on Thursday with Brent under $50 a barrel as excess supplies and the prospect of further dollar strength weighed on prices.

Gasoline stocks in the United States rose more than expected last week, overriding the bullish picture from a larger-than-expected drop in crude stockpiles and pushing prices down to their lowest levels in months.

“We’re talking about September crude runs now and that’s pretty much past summer,” said Tony Nunan, a risk manager at Mitsubishi Corp.

“The U.S. has (cheap) crude supply and can keep runs high but the rest of the world is not looking so good. We remain oversupplied and world-wide inventories are high.”

September Brent crude LCOc1 fell 21 cents to $49.38 a barrel by 0633 GMT after dropping to $49.02 on Wednesday, the lowest since Jan. 30.

U.S. crude CLc1 dropped to an intraday low of $44.82 a barrel, the weakest since March 20, and was last at $44.85, down 30 cents.

Excess supply could depress prices further as OPEC continues to produce 2 million barrels per day above its quota even with weak supplies from Libya and Iran, OCBC analyst Barnabas Gan said in a note.

The rise in the U.S. drilling rig count last week “is particularly surprising given weak oil prices”, he said.

U.S. crude inventories USOILC=ECI fell 4.41 million barrels, nearly three times more than the 1.5-million-barrel drop analysts had expected, data from the Energy Information Administration (EIA) showed on Wednesday.

Gasoline stocks USOILG=ECI rose by 811,000 barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a drop of about 500,000 barrels.

Investors are waiting for U.S. jobs data on Friday that could reinforce expectations the Federal Reserve will raise interest rates in September.

“Watch out for further oil market volatility around Friday’s jobs report as a strong print could drive the dollar higher and crude lower,” Societe Generale analysts said in a report.

A rate rise could strengthen the greenback, a negative for dollar-denominated oil because it becomes more expensive for holders of other currencies.

Technical charts showed Brent may retest support at $48.98 a barrel, with a break below that indicating prices could test the next support at $47.71, Reuters market analyst Wang Tao said.

U.S. crude is expected to fall further to $44.31 a barrel as it has pierced support at $45.17, Wang said.

Reuters