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GLOBAL OVERSUPPLY CONCERNS

Oil prices fall on Opec’s ‘no production cut’ comment

SINGAPORE, July 31, 2015

Oil prices fell in Asian trade on Friday as concern over global oversupply intensified after the head of oil producers' cartel Opec indicated there would be no cut-back in production, although a fall in the US dollar put a floor under prices.

Brent is heading for its fifth weekly fall after prices shed gains early in the session and reversed into negative territory.

Suggesting there would be no reduction in oil output among member states, Abdullah Al-Badri, secretary-general of the Organisation of the Petroleum Exporting Countries, said on Thursday that rising demand would prevent a further fall in oil prices.

Badri added that even if Opec had cut output by as much as one million barrels per day (bpd), it would not have helped prices.

Opec members produced around 31.25 million barrels per day in the second quarter, about 3 million more than daily demand, a Reuters survey showed this week.

Investors were waiting for the release of US employment and eurozone wage and inflation data later on Friday, said Ben Le Brun, a market analyst at Sydney's OptionsXpress.

The US data could provide a further indication of whether the U.S. Federal Reserve will raise interest rates in September.

"Prices will be range-bound between now and the release of wage and wage inflation data," Le Brun said.

The US "wage inflation number is a key piece of the jigsaw in terms of (Fed chair) Janet Yellen's interest rate puzzle", he added.

Brent futures for September delivery were down 13 cents at $53.18 as of 0420 GMT after settling down seven cents in the previous session.

US crude for September delivery dropped 28 cents to $48.24 a barrel after closing the previous session 27 cents down.

"Although we are seeing prices adjusting downwards, this likely stems from some adjustments of a strong dollar and adjustments to trading positions as oil finds a bottom," said Daniel Ang, an investment analyst at Singapore's Phillip Futures, in a note on Friday.

"On a longer term basis, growth from the U.S. economy would likely give some support to oil demand, which could help support prices. For today, we are unlikely to see much change to oil fundamentals and suggest that prices should continue to consolidate at this range," Ang's note added.

Giving some support to oil prices, the dollar index fell against a basket of currencies in early Asian trade although it was still near one-week highs.

It touched those highs after data overnight showed US gross domestic product expanded at a 2.3 per cent annual rate in the second quarter. First-quarter data was revised to show 0.6 per cent growth rather than a 0.2 per cent contraction.

Investors were also digesting a decision by the US Senate Energy Committee to approve a bill to lift a 40-year-old ban on crude oil exports, although it still faces an uphill battle in getting passed by the full Senate. - Reuters




Tags: Oil | US | Opec | data | wage | Fall |

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