Oil prices fall on oversupply concerns, weaker dollar support
SINGAPORE – Oil prices fell in Asian trade on Wednesday as concerns over global oversupply outweighed the impact of a likely larger than expected draw in U.S. crude stocks and a weakening dollar.
Asian investors focused on OPEC production figures that showed members of the Organization of the Petroleum Exporting Countries produced around 3 million barrels of oil per day more than daily demand in the second quarter, a Reuters survey showed.
“Glut is the word,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
OPEC members pumped 31.25 million barrels per day (bpd) in the second quarter against demand of 28.26 million bpd, the Reuters data showed.
Both Brent and U.S. crude came off session lows on Tuesday after data from industry group the American Petroleum Institute showed U.S. commercial crude stocks fell by 1.9 million barrels last week to 462 million, against analysts’ expectations of a 184,000 barrel draw.
“It was the first time since July 14 the market has seen any sign of a bit of a bounce, albeit temporary,” Spooner said.
The Department of Energy’s Energy Information Administration will release official U.S. oil inventory data later on Wednesday.
Brent futures for September delivery fell 17 cents to $53.13 as of 0347 GMT after falling 17 cents in the previous session when it hit an intra-day low of $52.28, its lowest since Feb. 2, on concerns over China’s stock market plunge.
U.S. crude for September delivery dropped 13 cents to $47.85 a barrel, after ending the previous session up 59 cents.
“Prices seem to have found the bottom of this rout as prices rebounded off a support of $46.92 and $52.68 for West Texas Intermediate and Brent,” said Phillip Futures in a note on Wednesday.
But it cautioned that oil prices could face headwinds if the dollar gains against other currencies following a U.S. Federal Reserve meeting that ends later on Wednesday that may confirm an interest rate rise as early as September.
A stronger dollar makes dollar-denominated commodities, including oil, more expensive for buyers using other currencies.
Brent will find support today at $52.68, while U.S. crude will be supported at $46.92, the Phillip Futures note added. Resistance should be at $53.92 for Brent and $48.29 for U.S. crude.
Spooner expected the Fed to confirm market expectations of an increase in interest rates this year, although the hike will be very modest.
“My view is the dollar is positioned for a bit of a decline,” because any hike had already been priced into currency markets, Spooner said.
The dollar slipped against a basket of six major currencies in Asian trade on Wednesday, while the euro gained against the dollar. The dollar index fell to 96.518, or 0.25 percent, after closing up at 96.745 in the previous session. – Reuters