Crude oil prices bounced back in Asia on Tuesday from overnight losses, as market players took advantage of sharp declines on global oversupply.
On the New York Mercantile Exchange, crude oil for September delivery climbed 0.35 percent to $40.20 a barrel. Investors await the forecasts of US crude and refined product inventories at the end of last week from the American Petroleum Institute late Tuesday. The numbers are followed by a more anticipated data on Wednesday from the US Department of Energy.
Brent crude for October delivery rose 0.57 percent to $42.38 a barrel on the ICE Futures Exchange in London.
Overnight, crude oil prices retreated towards April lows in the North American Trade on Monday, nearing bear market territory as indications of growing production in the United States and rising production among members of the Organization of the Petroleum Exporting Countries weighed.
London-traded Brent futures dropped 7.07 percent last week, marking a second consecutive weekly fall. Brent crude prices ended the previous month down 12.7 percent as outlook of increased exports from Middle Eastern and North African producers such as Iraq, Nigeria and Libya, added to fears that a surplus of oil products will lower demand for crude refiners.
According to reports on Friday, the Organization of the Petroleum Exporting Countries’ oil production is likely in July to hit its highest in recent history, as Iraq supplies more and Nigeria manages to export additional crude despite attacks on oil installations.
Supply from the OPEC has jumped to 33.41 million barrels per day in July from a revised 33.31 million barrels per day in June, based on shipping data and information from industry sources.
Meanwhile, Libya’s government finalized a deal with a group regulating the Ras Lanuf and Es Sider oil ports, the main terminals that have been closed since December 2014, to resume exports there as part of a political accord.
Oil Surplus Concerns Linger
Crude oil prices stabilized on Tuesday, but analysts cautioned that the growing global supply of crude and refined products threatens to weigh down prices back to the $35 range in the near term.
Due to temporary driving factors such as wildfires in Canada and oil-worker strikes in Kuwait, oil prices have rallied since plunging to a 13 year low in February. However, as these breaks dissolved, market players have turned their focus back to the oversupply crisis.
“The world is so oversupplied and the pace of rebalance is so slow that even geopolitical factors such as the ongoing civil strife in Nigeria are not enough to offset the fall in prices,” an energy analyst stated.
OPEC’s July monthly oil report, which also provides the cartel’s own demand and supply forecast, is seen to be released on August 10.
The fact that several refineries, both in the United States and in Asia, are going through their seasonal maintenance period adds to concerns. The decreased refining rate will increase supply backlogs as crude flows will have nowhere to go, according to an analyst.