SINGAPORE: Oil prices were higher in Asia Friday, but gains were limited in a market burdened by a persistent oversupply.
A continued rise in US commercial crude inventories further confirmed predictions the glut will last well into next year, with Iran also expected ramp up production when Western sanctions are lifted under a deal with major powers to curb its nuclear program.
At around 1:50 a.m. local time, US benchmark West Texas Intermediate (WTI) for delivery in December was trading three cents higher at $40.57 a barrel on its last trading day, while Brent crude for January was up 11 cents to $44.29.
WTI briefly fell below $40 in US trade Thursday before recovering to close above that level.
“WTI once again came under pressure, dipping below key $40 before recovering slightly, as US crude stockpiles continued to increase, keeping inventories over 100 million barrels above the five-year average,” said Bernard Aw, market strategist at IG Markets in Singapore.
He said the market would be watching if oil prices at near $40 will boost oil demand as expected by some crude producing nations.
“However, should this view break down, it’s everybody’s guess if OPEC [Organization of the Petroleum Exporting Countries]will be pressured to come up with a production response, which they have resisted for the past one year or so,” Aw told Agence France-Presse.
Members of the OPEC have so far resisted pressure to slash lofty output levels to ease the oversupply and prevent a further slide in oil prices.
Key OPEC members led by Saudi Arabia prefer to maintain market share by keeping output high amid tough competition from non-OPEC producers like the United States.
A stronger dollar, bolstered by expectations of a raise in US interest rates next month, is also helping push oil prices lower.
The commodity is traded in the US currency so a strong dollar typically dampens demand and prices by making oil more expensive to holders of weaker units.