Oil bounces back from two-month lows on weaker dollar
LONDON, July 12, 2016
Oil futures bounced back from two-month lows on Tuesday, helped by a weaker dollar, but a global stocks overhang and a drop in bullish bets by investors still weighed on prices.
Brent crude was at $46.93 per barrel at 0853 GMT, up 68 cents or 1.5 percent from the last close. US West Texas Intermediate (WTI) crude was up 58 cents at $45.34 a barrel.
Saudi Energy Minister Khalid Al Falih said on Tuesday the oil industry needed a price above $50 per barrel to sustain investments but added that downward pressure would prevail because of an inventory glut.
"We need a price higher than $50 to achieve balance in oil markets in the long term," Falih told German business daily Handelsblatt.
"But there are still excess stocks on the market – hundreds of millions of barrels of surplus oil. It will take a long time to reduce this inventory overhang," he added.
Oil prices fell to a two-month low on Monday on renewed oversupply fears. The dollar index dropped 0.5 percent on Tuesday, helping to lift commodity prices.
A brief suspension of tanker loading in Iraq and conflicting reports of new attacks in Nigeria also bolstered prices.
On the downside, a Reuters poll showed that China's economic growth likely cooled to a seven-year low in the second quarter as the industrial sector lost steam and a boost from financial services faded.
China's top oil firm CNPC said it saw the country's oil consumption rising to 670 million tonnes by 2027 from 520 million in 2014, implying annual growth of just 2 percent.
Hedge funds cutting their exposure to oil prices have also contributed to bearish sentiment, resulting in a 12 percent fall in Brent prices from their June peak above $52 per barrel.
"Oil prices could rally each time macro sentiment recovers on expectations of yet another round of quantitative easing, but for now the path of least resistance seems to be lower in the near term," said analyst Virendra Chauhan from Energy Aspects, which cut its third-quarter Brent forecast to $52 from $55.
Physical markets were weak, with Asian refiners processing less crude as they grapple with margins that plunged to five-year lows as refined products flooded the region. --Reuters
