Supply Glut Hurts Oil Prices

2015-0416 Supply Glut Hurts Oil Prices

A motorist pumps gas at a station in New Carolina. (AP)

NEW YORK: Crude futures edged up but relinquished early gains and briefly turned lower in choppy trading on Monday as a global supply glut continues to cap gains and traders took profits after oil’s earlier push higher.

Prices rose initially on concerns about turmoil in Yemen, expectations for no quick return to the market of Iranian barrels if a deal is reached on Tehran’s nuclear program and the slowdown in US drilling.

Weak export data from China raised concerns about the economy of the world’s No. 2 oil consumer but also fueled hopes for economic stimulus along with data that showed China’s crude oil imports were up 14 percent in March versus a year ago, though imports fell from February.

“Another case of bad news possibly being good news, since more stimulus for China would lead to more demand,” said Phil Flynn, analyst at Price Futures Group in Chicago.

US May futures, receiving support last week from agricultural demand in planting season and export demand, got more lift on news that Colonial Pipeline shut down on Sunday its Line 2 distillate pipeline running from Texas to North Carolina.

Brent May crude was up 13 cents at $58 a barrel at 12:25 p.m. EDT (1625 GMT), having swung between $57.46 and$59.54.

US crude was up 25 cents at $51.89 a barrel, well off its $53.10 peak just below its 100-day moving average at $53.18. It has not been above that key technical level since July 2014.

The market opened for Monday trading with momentum from Friday’s strong finish on news that the number of US rigs drilling for oil fell by 42 last week to 760, the largest decline in a month.

Adding support was news that speculators in Brent futures and options raised net long positions to the highest level since July 2014, in the week to April 7, data from InterContinental Exchange showed on Monday.

This followed Friday’s news of a big jump in net long positions of US crude futures and options in the same period.

But analysts at Germany’s Commerzbank were unconvinced by the investors’ bets.

“We believe the optimism among investors vis-‡-vis oil is exaggerated,” they said in a note on Monday.

(Source: ArabNews.com)

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