Oil price nosedives again as OPEC fails to control production

Posted by News Express | 11 December 2015 | 2,876 times

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Oil gave up most of its early gains on Thursday to trade around 40 dollars per barrel as persistent oversupply concerns offset a surprise fall in U.S. crude inventories after 10 weekly rises.

Brent futures are down more than six per cent this week and having dipped below 40 dollars per barrel.

There are renewed expectations it might test 2008's low around 36 dollars.

Brent futures were up 12 cents 40.23 dollars per barrel having traded as high as 40.70 dollars.

West Texas Intermediate (WTI) U.S. crude futures were down 11 cents at 37.05 dollars per barrel, erasing early gains.

WTI is down nearly 13 per cent this month.

Crude inventories fell 3.6 million barrels in the week to December 4, compared with analysts' expectations for an increase of 252,000 barrels, U.S. Energy Information Administration (EIA) data showed.

While this gave a slight boost on Wednesday and in early trading in Europe and Asia, bearish investors once again came to the fore in early U.S. trading hours.

“It will take quite a serious catalyst to end the bearishness,” said Richard Mallinson, geopolitical analyst at Energy Aspects.

The Organisation of Petroleum Exporting Countries (OPEC) last week failed to reach an agreement on production quotas, leading to fears that increased production from Iran and elsewhere would increase the glut further.

“OPEC showed last week it's a paper tiger in that it won't do anything to prevent supply growth,” said Michael Hewson, chief market strategist at CMC Markets.

OPEC forecast on Thursday that oil supply from non-member countries would fall more sharply next year, a development that would suggest its strategy of defending market share is working.

Oil has traded in a tight range close to 40 dollars per barrel since Monday when it fell to its lowest since 2009.

Hewson said that in thin liquidity up to year-end there is a good chance Brent will fall below its low since 2008 at around 38 dollars per barrel.

Still, there were signs of more demand from China, the world's second-biggest oil user.

The China Association of Automobile Manufacturers said vehicle sales were up 20 per cent in November from a year earlier to 2.5 million vehicles.

However, there was also fresh evidence of market oversupply.

The EIA data showed that U.S. distillate stockpiles rose by five million barrels, twice the expected increase and the sharpest increase since January. (Reuters/NAN)

Source: News Express

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