Supply glut drags down oil prices in Asia

Supply glut drags down oil prices in Asia

Wednesday, October 22, 2014 6:24 am

Oil prices slipped Wednesday after enjoying a recent upturn in line with a global equities rebound, while analysts said investors will now be keeping an eye on the US Federal Reserve’s next policy meeting.

However, oversupply and lingering concerns about demand in key markets are capping gains and keeping prices at multi-year lows.

US benchmark West Texas Intermediate for November delivery eased 31 cents to close at $82.50 a barrel. Brent North Sea crude for December fell four cents to $86.18.

WTI is stuck around levels not seen since mid-2012, while Brent is at a four-year low.

Crude sank in line with worldwide markets last week on fears about the strength of the global economy as China, Europe and Japan struggle to kickstart growth.

However, bargain-hunting and indications of loose central bank monetary policies for some time have supported a rebound this week, with US stocks surging for three straight sessions.

Adding to downward pressure on oil prices is a supply glut from increased output of shale in the United States, and price-cutting by major producers such as Saudi Arabia.

Tetsu Emori, fund manager at Astmax Asset Management in Tokyo, told AFP: “The market seems to have factored in the supply-demand gap and is looking for oil’s bottom.

“It’s difficult for traders to move now ahead of the (Fed policy meeting) next week and amid speculation over the European Central Bank, including reports that (it) could expand its easing programme.”

Reports on Tuesday said the ECB could expand its bond-buying scheme to include corporate notes as well as covered bonds and asset-backed securities.

The Fed will hold its next policy meeting next week, with investors closely watching to see if it will bring an end to its own bond-buying programme and give any hints about its plans for interest rates.

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