Oil prices down on resurgent supply glut worries

AFP - Oil tumbled in Asia yesterday, bucking an equities rally as worries over a supply glut and weak demand returned, with some analysts forecasting crude prices could fall to 
$40 a barrel.

Prices had recovered from two-month lows on the back of expectations of more stimulus measures in major economies. But surging output from crude producers reignited concern that the oversupply might not ease as quickly as expected.

US benchmark West Texas Intermediate for delivery in August was down 18 cents, or 0.39 percent, to $45.40 and Brent crude for September eased 16 cents, or 0.34 percent, to $47.21 a barrel at around 0310 GMT.

“Oil prices are being dragged lower on renewed oversupply concerns,” said IG Markets analyst Bernard Aw.

“We have seen OPEC output hitting its highest in recent history, lifted by Nigeria production and more supply from gulf producers,” he told AFP. “There were analyst warnings of oil reaching $40, which weighed on sentiments,” he added.

Organization of the Petroleum Exporting Countries output climbed 300,000 barrels per day in June, close to an eight-year high of 32.73 million barrels per day, according to Energy information provider S&P Global Platts.

It said this was driven by a tentative recovery in production in Nigeria and Libya, and a “steady” rise in output from Saudi Arabia and Iran. The oversupply concerns come amid falling demand, especially from China, the world’s top energy consumer. S&P Global Platts said that China’s apparent oil demand shrank by 2.7 percent in May from a year earlier.

“The contraction in oil demand in May represented the fourth consecutive month of negative growth and was due to declines in gas oil and fuel oil demand, amid slowing economic growth,” it said. “China’s oil demand growth is expected to moderate significantly in 2016 as gross domestic product growth slows on the back of economic rebalancing.”

Over the past month, oil has fluctuated between $44 and $52 per barrel, after hitting near 13-year lows below $30 in February on the back of high supplies.